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Pages:
1 page/≈275 words
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Style:
APA
Subject:
Business & Marketing
Type:
Coursework
Language:
English (U.S.)
Document:
MS Word
Date:
Total cost:
$ 5.18
Topic:
Weighted Average Cost of Capital
Coursework Instructions:
Based on the information below, calculate the weighted average cost of capital. Great Corporation has the following capital situation: Debt: One thousand bonds were issued five years ago at a coupon rate of 8%. They had 25-year terms and $1,000 face values. They are now selling to yield 9%. The tax rate is 36% Preferred stock: Two thousand shares of preferred are outstanding, each of which pays an annual dividend of $7.50. They originally sold to yield 15% of their $50 face value. They're now selling to yield 8%. Equity: Great Corp has 125,000 shares of common stock outstanding, currently selling at $14.48 per share. Dividend expected for next year is $1.00 and the growth rate is 5%.
Coursework Sample Content Preview:
Weighted Average Cost of Capital
Name
Institution
Weighted average cost of capital
This is calculation based on the weighted average cost of capital equals to {(weight of equity * cost of equity) + (weight of debt * cost of debt)}. Therefore, in order to calculate the necessary overall cost of capital for the company, there is need of developing the necessary measures and concepts important in supporting the capital of the company.
Step1: Cost of equity
{(1 / 14.8) * 100%} = 6.9 %
Step 2: Weight of Equity
{((7...
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