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You are given the following information for Watson Power Co.Assume the company’s tax rate is 25 percent. Debt:15,000 6.4 percent coupon bonds outstanding, $1,000 par value,28 years to maturity, selling for 106 percent of par; the bondsmake semiannual payments. Common stock:480,000 shares outstanding, selling for $66 per share; the betais 1.17. Preferred stock:21,000 shares of 4.2 percent preferred stock outstanding,currently selling for $87 per share. The par value is $100 pershare. Market:5 percent market risk premium and 5.3 percent risk-freerate.
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