Reference no: EM131548407

Match the Weighted Average Cost of Capital to each of the scenarios given for ABC Corporation. Target capital structure: 32% debt, 14% preferred stock and 54% common equity. Yield to maturity on bonds: 4.7%; Preferred stock dividend: $7.79 per year; current market price of preferred stock is $70.29. CAPM data for common equity: risk-free rate is 3.6%; market risk premium for the average stock is 4.7%; ABC has a beta of 2.31. ABC's marginal tax rate is 40%. Target capital structure: 31% debt, 9% preferred stock and 60% common equity. Yield to maturity on bonds: 4.4%; Preferred stock dividend: $7.89 per year; current market price of preferred stock is $70.39. CAPM data for common equity: risk-free rate is 3.2%; market risk premium for the average stock is 15.0%; ABC has a beta of 0.76. ABC's marginal tax rate is 40%. Target capital structure: 42% debt, 14% preferred stock and 44% common equity. Yield to maturity on bonds: 8.5%; Preferred stock dividend: $7.90 per year; current market price of preferred stock is $70.40. CAPM data for common equity: risk-free rate is 3.7%; market risk premium for the average stock is 8.1%; ABC has a beta of 1.35. ABC's marginal tax rate is 40%. Target capital structure: 37% debt, 10% preferred stock and 53% common equity. Yield to maturity on bonds: 7.0%; Preferred stock dividend: $7.30 per year; current market price of preferred stock is $69.80. CAPM data for common equity: risk-free rate is 3.8%; market risk premium for the average stock is 5.1%; ABC has a beta of 1.93. ABC's marginal tax rate is 40%. Target capital structure: 33% debt, 10% preferred stock and 57% common equity. Yield to maturity on bonds: 5.5%; Preferred stock dividend: $7.41 per year; current market price of preferred stock is $69.91. CAPM data for common equity: risk-free rate is 3.3%; market risk premium for the average stock is 12.9%; ABC has a beta of 0.81. ABC's marginal tax rate is 40%.