Question

GHI Company faces a 40% tax rate. Using the correct answers from the previous parts, what is the company's WACC? Enter your answer as a percentage and rounded to 2 DECIMAL PLACES. Do not include the percentage sign in your answer.

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given - GHI Company also has preferred stock outstanding that pays a $1.8 per share fixed dividend. If this stock is currently priced at $25.7 per share. cost for prefeered stock 7.00

GHI Company has existing debt issued three years ago with a coupon rate of 6%. The firm just issued new debt at par with a coupon rate of 5.2%. company's pre tax cost of debt is 5.20

GHI Company has 4 million common shares outstanding and 3 million preferred shares outstanding, and its equity has a total book value of $70 million. Its debt has a market value of $20 million. If GHI Company's common and preferred shares are priced at $18.8 and $25.7, respectively, what is the market value of GHI Company's assets is 172.3

cost of equity 12.37

Answer 1

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2 Le 52 * 9x Ova Tx 4 ENG 01:39 06-03-2020 - 24 187 fix X B C D E F G H I J K L M N A NOTE 1 COST OF DEBT = 5.20% AFTER TAX COST OF DEBT = 5.20%*(1-0.40) = 3.12% NOTE 2 MARKET VALUE OF DEBT = MARKET VALUE OF COMMON STOCK = MARKET VALUE OF PREFERRED STOCK = 20 75.2 [ 4 X 25.7] 77.1 [3 X 25.7] 172.3 NOTE 3 WEIGHT OF DEBT = 20/172.3 = WEIGHT OF COMMON STOCK = 75.2/172.3 = WEIGHT OF PREFERRED STOCK = 77.1/172.3 = 0.1161 0.4364 0.4475 CALCULATION OF WACC SOURCE WEIGHTS COMMON STOCK PREFERRED STOCK LONG TERM DEBT 0.4364 0.4475 0.1161 COC(%) WEIGHTED COST BA*B 12.37% 5.40% 7.00% 3.13% 3.12% 0.36% ANSWER WACC = 8.89% ... LOAN EAIR OLIVER reinvest Sheet6 Sheet7 BEQUEST RETIRE USE EXCEL gnp DOLLAR COST RATE LOAN ... |