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Preferred Stock and WACC The Saunders Investment Bank 15. has the following financing outstanding. What is the WACC for the company? Debt: Preferred...

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I'm not sure how to put together the WACC formula using the information that is provided.

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15. Preferred Stock and WACC The Saunders Investment Bank
has the following financing outstanding. What is the WACC for the company? Debt: Preferred stock: Common stock: Market: 50,000 bonds with an 8 percent coupon rate and a quoted price of 1 19.80; the bonds have 25 years to maturity. 150,000 zero coupon
bonds with a quoted price of 13.85 and 30 years until maturity.
120,000 shares of 6.5 percent preferred with a current price of $1 12,
and a par value = $100. 2,000,000 shares of common stock; the current price is $65, and the
beta of the stock is 1.1. The corporate tax rate is 40 percent, the market risk premium is 9
percent, and the risk-flee rate is 4 percent.

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3 comments
  • I found this question as it was very similar to one that I was working on for my class and needed the assistance with the different steps in finding the WACC. I followed your steps and got the answer for the sample question but when I enter the values for my question I get an incorrect result.
    • raf_25
    • Aug 04, 2018 at 3:57pm
  • Hello. Remember, do not round your intermediate answers. If you round the answers, round them to 6 decimal places.
    • bfacenjoro
    • Aug 04, 2018 at 4:00pm
  • I'm not rounding my intermediate answers and I'm still not getting the correct answer when I substitute the values from my problem. My question uses all the same wording but different values.
    • raf_25
    • Aug 05, 2018 at 12:02pm

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