Question

Given the following information on Ke-Ma-Gen Ltd., what is its WACC?

Debt:

• Number of bonds = 10,000
• Par value = $1,000
• Coupon rate = 9% (semi-annual coupons)
• Time to maturity = 10 years
• Market value = 98% of par

Common equity:

• Number of shares outstanding = 1,000,000
• Par value = $1
• Price per share = $3.50
• Dividends per share = $0.70

Preferred equity:

• Number of shares outstanding = 50,000
• Price per share = $20
• Dividend yield = 5%

Other information:

• Tax rate = 40%
• Equity beta = 1.2
• Market risk premium = 16%
• Risk-free rate = 5%

Answer 1

=(10000*1000*98%*(RATE(10*2,9%*1000/2,-98%*1000,1000)*2*(1-40%))+1000000*3.50*(5%+1.2*16%)+50000*20*(5%))/(10000*1000*98%+1000000*3.50+50000*20)

=10.1016%