3. Given the following information for Janicek Power Co., find the WACC. Assume the company’s tax rate is 35%.

Question

Debt: 8,500 7.2% coupon bonds outstanding, $1000 par value, 25 years to maturity, selling for 118% of par; the bonds make semiannual payments
Common Stock: 225,000 shares outstanding, selling for $87 per share; beta is 1.15
Preferred Stock: 15,000 shares of 4.8%preferred stock outstanding, currently selling for $98 per share
Market: 7% market risk premium and 3.1% risk-free rate

Answer 1

HARD HUHN?

Answer 2

WACC= (E/V) * Re + (D/V) * Rd * (1-Tc)
8.48