Posted: September 16th, 2017

Weighted Average Cost of Capital Homework…

eighted Average Cost of Capital Homework

Information:

1. Capital Structure

a. Debt: $100,000

b. Equity: $100,000

c. Preferred Stock: $50,000

2. Debt

a. Price: $1,153.00

b. Coupon Payment: $50.00

c. Years: 14 Years

3. Preferred Stock

a. Dividend: $3.45

b. Price: $54.43

4. Equity 1 (Constant Growth)

a. Dividend: $4.23

b. Price: $53.12

c. Constant Growth: 10%

5. Equity 2 (CAPM)

a. Return on Market: 10%

b. Return on Risk Free Asset: 3%

c. Beta: .59

6. Tax Rate: 32%

Problem 1: Calculate the ‘Weighted Average Cost of Debt’.

Problem 2: Calculate the ‘Weighted Average Cost of Preferred Stock’.

Problem 3: Calculate the ‘Weighted Average Cost of Equity (Constant Growth)’.

Problem 4: Calculate the ‘Weighted Average Cost of Equity (CAPM)’.

Problem 5: Calculate the ‘Weighted Average Cost of Capital (Use CAPM for Equity)’.

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