Weighted Average Cost of Capital

Weighted Average Cost of Capital

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Weighted Average Cost of Capital

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%.

CONTENT:
Weighted Average Cost of CapitalNameInstitutionWeighted average cost of capitalThis 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 ne...
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