Given the following information for Lightening Power CO., find the weighted average cost of capital (WACC). Assume the company's tax rate is 35%.
|
Bond
|
Coupon Rate
|
Price Quote (% of Par)
|
Maturity
|
Face Value
|
Coupon Payment
|
|
1
|
6.00%
|
105.86
|
5 years
|
$4,000,000
|
Semiannual
|
|
2
|
7.50%
|
114.52
|
8 years
|
$3,500,000
|
Semiannual
|
Common stock: 310,000 shares outstanding, selling for $57 per share; the beta is 1.05.
Preferred stock: 15,000 shares of preferred stock outstanding, currently selling for $72 per share and annual dividend is $4 per share.
Market: 7% market risk premium and 4.5% risk-free rate