Question

pls help asap! show calculations in writting

10 points Save Answer Raymond Mining Corporation has 9.2 million shares of common stock outstanding, 360,000 shares of 5% $100 par value preferred stock outstanding, and 157,000 7.50% semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $40 per share and has a beta of 1.60, the preferred stock currently sells for $96 per share, and the bonds have 15 years to maturity and sell for 111% of par. The market risk premium is 8.0%, T-bills are yielding 5%, and Raymond Mining's tax is 40%. The YTM before taxes is 6.352% What is the WACC? (Enter your answers in whole dollars. Omit % sign in your response.)

Answer 1

Market value of Equity = 9.2 million*$40 = $368 million

Market Value of Preferred stock = 0.36 million*$96= 34.56 million

Market Value of Debt = 0.157 million*$1110 = $174.27 million

Weights = Market Value/ Total Capital

Cost of Equity = 5% +(1.6*8%) = 17.8%

Cost of Preferred Stock = $5/$96 = 5.208%

After tax cost of debt = 6.352%*(1-0.4) = 3.8112%

	Market Value	Weights	Cost	Weights*Cost
Equity	368	63.80%	0.1780	11.36%
Preferred	34.56	5.99%	0.0521	0.31%
Debt	174.27	30.21%	0.0381	1.15%
Total Capital	576.83	WACC	12.82%

WACC in Dollars = $576.83 million*12.82% = $74 million