What is the firm wacc and ocf

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Reference no: EM132021999

Case Narrative:

The firm’s tax rate is 35%. The company has $2,000,000 in annual sales, and annual fixed expenses of $1,100,000 and $500,000 in variable expenses. There was an initial investment in the firm of $1,500,000, which will be depreciated straight-line over 10 years. The project is expected to last 10 years.

The firm has a Capital Structure as follows:

The market value of the bonds is $2,000,000.

The market value of the Preferred Stock is $1,000,000.

The market value of the Common stock is $7,000,000

The cost of the preferred stock is 4%, the cost of the common stock is 6%, the cost of the bonds is 8%.

What is the firm’s WACC? ________________________

What is the firm’s OCF __________________________

Reference no: EM132021999

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