Brookings bros inc is considering its investment plan for, Ask an Expert

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Brookings Bros, Inc. is considering its investment plan for next year. Before the meeting of top management, CEO of the company asks for the current overall cost of the company. CFO of the company will then prepare the data and answer this question of what is the cost of the firm doing business (WACC). The company currently has $ 300,000 bonds that have a 9% pre-tax cost. The company has 1000 shares of preferred stocks that are selling at $100 on the market right now. The cost of the preferred stocks is 10%. The company has 10,000 outstanding shares of common stocks that are selling at $70 per share with a beta of 1.2. Right now, the risk-free rate is 5% and the market risk premium is 7%. Assume the company has 40% tax rate. Based on the information given, compute the WACC for the company.

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Financial Management, Finance

Category:- Financial Management
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