Question

You are given the following information for Huntington Power Co. Assume the company's tax rate is 22 percent. 27000 4.6 percent coupon bonds outstanding, $2,000 par value, 21 years to maturity, selling for 104 percent of par; the bonds make semiannual payments Debt: Common stock: 455,000 shares outstanding, selling for $73 per share; the beta is 1.07 Market: 6 percent market risk premium and 3.8 percent risk-free rate What is 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.) WACC

Answer 1

Cost of equityrisk free rate beta x market premium 10.22% 0.038 1.07*0.06) 4.31% RATE(21*2,46/2,-1040,1000)*2 Before tax cost of debt 3.36% (4.31%*(1-0.22) after tax cost of debt before tax cost x 1-tax rate After tax WACC: weight 0.37 0.63 Particulars quiiy Debt cost weighted cost 10.22% 0.03798 3.36% 0.02112 amount $33,215,000 $56,160,000 $89,375,000 5.91% NACC