Bonds make semi annual payments-common stock

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Reference no: EM13913715

Given the following information for Bellevue Power Co, find the WACC. Assume the company's tax rate is 35 percent. Debt: 5,000. 7% coupon bonds outstanding, $ 1000 par value, 20 years to maturity, selling for 92 percent of par; bonds make semi annual payments. Common stock: 100,000 shares outstanding, selling for $57 per share; the beta is 1.15. Preferred stock: 13,000 shares of 7 percent preferred stock outstanding currently selling for $104 per share. Market: 8 percent market risk premium and 6 percent risk free rate. Find the WACC Please explain how to calculate Rp, which is the cost of Preferred Stock. I know using CAPM, Re, the cost of equity is 15.2%, and Rd, the cost of Debt is 7.796%. Furthermore the weighted averages are as follows: for debt: 0.395, for Equity: 0.489, for preferred stock: 0.116. How do I get Rp, the cost of preferred stock since that is the only value i now need to get the WACC. I know the formula is Rp = Dividend/P0 but i cannot understand this question language. Please explain how to get Rp.

Reference no: EM13913715

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