Consider the following information for Watson Power Company: Debt: 3,500 7 percent coupon bonds outstanding, $1,000 par value, 19 years to maturity, selling for 105 percent of par; the bonds make semiannual payments. Common stock: 84,000shares outstanding, selling for $56 per share; the beta is 1.17. Preferred stock: 11,500 shares of 6.5 percent preferred stock outstanding, currently selling for $108 per share. Market: 8.5 percent market risk premium and 6.5 percent risk - free rate.Assume the company's tax rate is 34 percent. Find the WACC. Multiple Choice 10.87 % 10.47 % 10.37% 11.31 % 10.66%

WACC means weighted average cost of capital.It is computed as follows:-WACC…

Consider the following information for Watson Power Company: Debt: 3,500 7 percent coupon bonds outstanding, $1,000 par value, 19 years to maturity, selling for 105 percent of par; the bonds make semiannual payments. Common stock: 84,000 shares outstanding, selling for S56 per share; the beta is 1.17. Preferred stock: 11,500 shares of 6.5 percent preferred stock outstanding, currently selling for $108 per share. Market: 8.5 percent market risk premium and 6.5 percent risk-free rate. Assume the company's tax rate is 34 percent. Find the WACC. Multiple Choice 10.87 % 10.47 % 10.37 % 11.31% 10.66%

Consider the following information for Watson Power Company: Debt: 3,500 7 percent coupon bonds outstanding, $1,000 par value, 19 years to maturity, selling for 105 percent of par; the bonds make semiannual payments. Common stock: 84,000 shares outstanding, selling for S56 per share; the beta is 1.17. Preferred stock: 11,500 shares of 6.5 percent preferred stock outstanding, currently selling for $108 per share. Market: 8.5 percent market risk premium and 6.5 percent risk-free rate. Assume the company's tax rate is 34 percent. Find the WACC. Multiple Choice 10.87 % 10.47 % 10.37 % 11.31% 10.66%

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Consider the following information for Watson Power Co.: Debt: 4,500 7 percent coupon bonds outstanding, $1,000 par value, 18 years to maturity, selling for 103 percent of par; the bonds make semiannual payments. Common stock: 108,000 shares outstanding, selling for $61 per share; the beta is 1.08. Preferred stock: 14,000 shares of 6.5 percent preferred stock outstanding, currently selling for $104 per share. Market: 9 percent market risk premium and 6 percent risk-free rate. Assume the company's tax rate is 34 percent. Find the WACC.
Consider the following information for Watson Power Company: Debt: 2,500 6 percent coupon bonds outstanding, $1,000 par value, 17 years to maturity, selling for 103 percent of par; the bonds make semiannual payments. Common stock: 50,000 shares outstanding, selling for $64 per share; the beta is 1.1. Preferred stock: 7,500 shares of 5.5 percent preferred stock outstanding, currently selling for $106 per share. Market: 8 percent market risk premium and 5 percent risk-free rate. Assume the company's tax rate is 34 percent. Find the WACC. Multiple Choice 8.83% 8.93% 9.23% 9.59% 8.73%
Consider the following information for Watson Power Company: Debt: 3, 500 8 percent coupon bonds outstanding, $1,000 par value, 20 years to maturity, selling for 104 percent of par; the bonds make semiannual payments. Common stock: 80, 500 shares outstanding, selling for $59 per share; the beta is 1.09. Preferred stock: 12, 000 shares of 7.5 percent preferred stock outstanding, currently selling for $107 per share. Market: 9.5 percent market risk premium and 7 percent risk - free rate. Assume the company's tax rate is 35 percent. Find the WACC.
You are given the following information on Parrothead Enterprises: Debt: 9,400 6.6 percent coupon bonds outstanding, with 21 years to maturity and a quoted price of 105. These bonds pay interest semiannually and have a par value of $1,000. Common stock: 245,000 shares of common stock selling for $64.90 per share. The stock has a beta of .94 and will pay a dividend of $3.10 next year. The dividend is expected to grow by 5.4 percent per year indefinitely. Preferred stock: 8,400 shares of 4.7 percent preferred stock selling at $94.40 per share. The par value is $100 per share. Market: 11.6 percent expected return, risk-free rate of 3.8 percent, and a 24 percent tax rate. Calculate the company's WACC. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.
Consider the following information for Watson Power Company: Debt: Common stock: Preferred stock: Market: 4,000 8 percent coupon bonds outstanding, $1,000 par value, 21 years to maturity, selling for 102 percent of par; the bonds make semiannual payments. Find the WACC. 96,000 shares outstanding, selling for $56 per share; the beta is 1.07. 13,500 shares of 7 percent preferred stock outstanding, currently selling for $104 per share. 9.5 percent market risk premium and 7 percent risk-free rate. Assume the company's tax rate is 34 percent.
Consider the following information for Evenflow Power Co., Debt: 4,000 7.5 percent coupon bonds outstanding, $1,000 par value, 23 years to maturity, selling for 104 percent of par; the bonds make semiannual payments. Common stock: 100,000 shares outstanding, selling for $61 per share; the beta is 1.1. Preferred stock: 13,000 shares of 6.5 percent preferred stock outstanding, currently selling for $105 per share. Market: 9 percent market risk premium and 6 percent risk-free rate. Assume the company's tax rate is 32 percent. Required: Find the WACC. (Do not round your intermediate calculations.) Multiple Choice 11.21% 10.96% 11.63% 10.71% 10.81%
Suppose Westerfield Co. has the following financial information: Debt: 900, 000 bonds outstanding with a face value of $1,000. The bonds currently trade at 85% of par and have 12 years to maturity. The coupon rate equals 7%, and the bonds make semiannual interest payments. Preferred stock: 600,000 shares of preferred stock outstanding; currently trading for $108 per share, paying a dividend of $9 annually. Common stock: 25,000,000 shares of common stock outstanding; currently trading for $185 per share. Beta equals 1.22. Market and firm information: The expected return on the market is 9%, the risk - free rate is 5%, and the tax rate is 21 %. Calculate the weight of debt in the capital structure. (Enter percentages as decimals and round to 4 decimals)
Suppose Westerfield Co. has the following financial information: Debt: 900,000 bonds outstanding with a face value of $1,000. The bonds currently trade at 85% of par and have 12 years to maturity. The coupon rate equals 7%, and the bonds make semiannual interest payments. Preferred stock: 600,000 shares of preferred stock outstanding; currently trading for $108 per share, paying a dividend of $9 annually. Common stock: 25,000,000 shares of common stock outstanding; currently trading for $185 per share. Beta equals 1.22. Market and firm information: The expected return on the market is 9%, the risk-free rate is 5%, and the tax rate is 21%. Calculate the weight of the common stock in the capital structure. (Enter percentages as decimals and round to 4 decimals)
Suppose Westerfield Co. has the following financial information: Debt: 900,000 bonds outstanding with a face value of $1,000. The bonds currently trade at 85% of par and have 12 years to maturity. The coupon rate equals 7%, and the bonds make semiannual interest payments. Preferred stock: 600,000 shares of preferred stock outstanding; currently trading for $108 per share, paying a dividend of $9 annually. Common stock: 25,000,000 shares of common stock outstanding; currently trading for $185 per share. Beta equals 1.22. Market and firm information: The expected return on the market is 9%, the risk-free rate is 5%, and the tax rate is 21%. Calculate the cost of preferred stock. (Enter percentages as decimals and round to 4 decimals)
You are given the following information on Parrothead Enterprises: Debt: Common stock: Preferred stock: Market: 8,600 7.2 percent coupon bonds outstanding, with 23 years to maturity and a quoted price of 107. These bonds pay interest semiannually and have a par value of $2,000. WACC 285,000 shares of common stock selling for $65.70 per share. The stock has a beta of 1.02 and will pay a dividend of $3.90 next year. The dividend is expected to grow by 5.2 percent per year indefinitely. 9,200 shares of 4.6 percent preferred stock selling at $95.20 per share. The par value is $100 per share. 10.8 percent expected return, risk-free rate of 4.2 percent, and a 22 percent tax rate. Calculate the company's WACC. Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. %
You are given the following information on Parrothead Enterprises: Debt: 8,500 7.1 percent coupon bonds outstanding, with 24 years to maturity and a quoted price of 106.75. These bonds pay interest semiannually and have a par value of $2,000. Common stock: 280,000 shares of common stock selling for $65.60 per share. The stock has a beta of 1.06 and will pay a dividend of $3.80 next year. The dividend is expected to grow by 5.1 percent per year indefinitely. Preferred stock: 9,100 shares of 4.55 percent preferred stock selling at $95.10 per share. The par value is $100 per share. Market: 10.9 percent expected return, risk-free rate of 4.15 percent, and a 21 percent tax rate. Calculate the company's WACC.
Consider the following information for Evenflow Power Co., Debt: Common stock: 4,000 7 percent coupon bonds outstanding, $1,000 par value, 17 years to maturity, selling for 102 percent of par; the bonds make semiannual payments. 84,000 shares outstanding, selling for $59 per share; the beta is 1.17. 13,000 shares of 6.5 percent preferred stock outstanding, currently selling for $103 per share. 8.5 percent market risk premium and 6 percent risk-free rate. Preferred stock: Market: Assume the company's tax rate is 31 percent. Required: Find the WACC. (Do not round your intermediate calculations.)

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