Weighted average cost of capital-rodriguez corporation

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Rodriguez Corporation is constructing is cost of capital schedule. The target capital structure is based on the market values of the company's outstanding securities (Hint: Calculate the weights first!). It has 215,000 bonds outstanding with a 7.4% coupon, paid semiannually, a current maturity of 51 years, and sell for $890 each. The firm could sell preferred stock (par value $100) which pays an 11.5% annual dividend for $89 each. Johnstone currently has 725,000 shares of preferred stock outstanding. Johnstone is a constant growth firm which just paid a dividend of $3.00 on its common stock which sells for $62 per share, and has an expected growth rate of 7%. There are currently 6,500,000 shares of common stock outstanding. The firm's marginal tax rate is 24%.

Please estimate their weighted average cost of capital.

Reference no: EM132613716

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