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Calculate the weighted average cost of capital

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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 11%. 

They had 20-year terms and $1,000 face values. They are now selling to yield 9%. The tax rate is 37%. 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 11%.Equity: Great Corp has 108,000 shares of common stock outstanding, currently selling at $18.48 per share. 

Use the risk premium approach and assume a 3% risk premium.

Reference no: EM13986261

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