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You are given the following information on Parrothead Enterprises: Debt: 9,200 6.4 percent coupon bonds outstanding, with 23 years to maturity and a quoted price of 104.5. These bonds pay interest semiannually and have a par value of $1,000. Common stock: 235,000 shares of common stock selling for $64.70 per share. The stock has a beta of .92 and will pay a dividend of $2.90 next year. The dividend is expected to grow by 5.2 percent per year indefinitely. Preferred stock: 8,200 shares of 4.6 percent preferred stock selling at $94.20 per share. The par value is $100 per share. Market: 11.8 percent expected return, risk-free rate of 3.7 percent, and a 22 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.) 8.22(X% WACC

Answer 1

Value 9,614,000.0037.57% 15,204,500.00 59.41%11.15% Weight cost Weight Cost Debt 4.71% 1.77% Equity Preferred 6.63% 772,440.00 25,590,940.00 3.02% 4.88% 0.15% WACC 8.54%

Weight Value Cost Weight"cost | =E4*D4 -E5*D5 9200* (1000*104.5%)C4/ $C$7 -235000 64.7 -8200 94.2 -SUM(C4: C6) (RATE (23*2,6.4%/2*1000,-104.5%*1000,1000)*2)*(1-0.22) - 3.7%+0.92 ( 11.8%-3.7%) Debt Equity Preferred C5/$C$7 -C6/$C$7 4.6/94.2 =E6*D6 |-SUM(F4:F6) WACC