Given the following information for a corporation, find the WACC (weighted average cost of capital)....
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Finance
Given the following information for a corporation, find the WACC (weighted average cost of capital). Assume that the companys tax rate is 30%. (Compute cost of each security, and weight of each security separately, and apply the WACC formula). ( Computation of cost of securities; Computing weights; Computing the WACC are required steps in this question).
Common Stock: 20 million shares outstanding, selling for $4 per share; the beta is 1.05.
Preferred Stock: 5 million shares outstanding, selling for $5 per share, pays $1 annually per share.
Debt: 1 million 6% quarterly coupon bonds outstanding, $100 face value, 20 years to maturity, selling at par.
Market: 7.5% market return and 4.5% risk-free rate.
Solve it manually, without excel.
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