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You are given the following information concerning Parrothead Enterprises: Debt: 9,100 6.3 percent coupon bonds outstanding,...

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Finance

You are given the following information concerning ParrotheadEnterprises: Debt: 9,100 6.3 percent coupon bonds outstanding, with24 years to maturity and a quoted price of 104.25. These bonds payinterest semiannually. Common stock: 230,000 shares of common stockselling for $64.60 per share. The stock has a beta of .86 and willpay a dividend of $2.80 next year. The dividend is expected to growby 5.1 percent per year indefinitely. Preferred stock: 8,100 sharesof 4.55 percent preferred stock selling at $94.10 per share.Market: An expected return of 11.9 percent, a risk-free rate of5.05 percent, and a 34 percent tax rate. Calculate the WACC forParrothead Enterprises.

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4.0 Ratings (557 Votes)
MV of equityPrice of equitynumber of shares outstanding MV of equity646230000 14858000 MV of BondPar valuebonds outstandingage of par MV of Bond1000910010425 9486750 MV of Preferred equityPricenumber of shares outstanding MV of Preferred    See Answer
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You are given the following information concerning ParrotheadEnterprises: Debt: 9,100 6.3 percent coupon bonds outstanding, with24 years to maturity and a quoted price of 104.25. These bonds payinterest semiannually. Common stock: 230,000 shares of common stockselling for $64.60 per share. The stock has a beta of .86 and willpay a dividend of $2.80 next year. The dividend is expected to growby 5.1 percent per year indefinitely. Preferred stock: 8,100 sharesof 4.55 percent preferred stock selling at $94.10 per share.Market: An expected return of 11.9 percent, a risk-free rate of5.05 percent, and a 34 percent tax rate. Calculate the WACC forParrothead Enterprises.

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