# Question 8 options:Clovechok Petroleum has the following capital structure on its Statement of Financial Position:

Bonds, 6% coupon annually, 15 years to maturity

4,000,000

Preferred shares, 9% dividend rate

1,750,000

Common shares 250,000 shares outstanding

4,000,000

Retained earnings

__2,000,000__

11,750,000

- New debt can be issued to yield 10%, with flotation costs being 2%
- New preferred shares would require a yield of 12%, with after tax flotation costs of 3%
- Common shares are currently trading at $20.00; however, new shares would be sold at $19.80 and also incur 7% after tax flotation cost. The expected dividends in the coming year will be $3.50. The growth rate is 6%.
- The risk free rate = 4.6%, the market return = 18.60% and Beta = 1.35
- Clovechok's tax rate is 38% and
__would require new common shares to fund new investments.__

**What is the value of Kd? Round to 2 decimal places. No % required.**

**What is the value of Kp? Round to 2 decimal places. No % required.**

**What is the value of Kn? Round to 2 decimal places.**

**What is the market value of the bonds? Round to the nearest dollar. No dollar sign and no commas. Example.... 1050653**

**What is the market value of the preferred shares? No dollar sign and no commas. Example.... 1050653**

**What is the market value of the common shares? No dollar sign and no commas. Example.... 1050653**

Let's pretend that I gave you the following information:

Kd = 7%

Kp = 9%

Kn = 13%

Bonds Market Value = $2,000,000

Preferred Share Market Value = $3,000,000

Common Share Market Value = $5,000,000

**What is the value of WACC? Round to 2 decimal places. No %. Example... 11.50**

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