1) A compant has 50,000 shares of common stock outstanding at a market price of $20 a share. The common stock just paid a $1 annual dividend and has a divided growth rate of 5 percent. What is the total market value of common stock? What is the cost of equity (common stock)?
2) There are 12,000 shares of 6 percent preferred stock outstanding at a market price of $51 a share. What is the total market value of preferred stock? What is the cost of preffered stock?
3) The outstanding bonds mature in 15 years, have a total face value of $750,000, a face value per bond of $1,000, and a market price of $1,050 each. The bonds pay 8 percent interest, semiannually. What is the total bond market value? What is the cost of debt?
4) Use the results from questions 1-3 to compute the weight of equity (common stock), the weight of preferred stock, and the weight of debt.
5) The tax rate is 15 percent. Computer WACC?