The Sweet Dreams Candy Company has hired you to estimate itsWeighted Average Cost of Capital.
Management has provided you with the following information:
Current Debt: The company has180,000 bonds, par value $1000, selling at 95% of par. The bondshave a coupon rate of 3% and 15 years to maturity.
Common Stock: The company has3,750,000 shares of common selling for $62 per share. The bookvalue per share is $23. The stock has a beta of 1.2
Additional information: Thecompany has a tax rate of .35, the market risk premium is 7.5%, andthe risk-free interest rate is 2%.
