Evaluate the weighted average cost of capital

Reference no: EM13195627

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 Answer .textBoxEditorText { font-size: .9em; } .expanded { display: block; } .collapsed { display: none; } .embedded { background-color:#EEEEEE; margin: 50px; padding: 50px; }

Reference no: EM13195627

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