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1) Presently, ABC has two bonds listed in Mergent Bond Record: a $500 million amount outstanding of 8.5% coupon bond due 2018 trading at 105% of par with YTM of 7.2%; a $900 million amount outstanding of 6.25% coupon bond due 2022 trading at 99% of par with YTM 6.8%. ABC also has two million shares of favoured stocks outstanding with book value of= $115 per share. Increasing annual dividend is= 10.0%. The favoured stock is selling for $160. Company's common stock is selling at= $50 per share that paid quarterly dividend of= $0.40 last year. Expected quarterly dividend is $0.44. Total number of share outstanding is 100 million. ABC marginal tax rate is= 30%.

a) Estimate ABC's After-tax cost of debt.

b) Estimate ABC's the cost of favoured stock.

c) Estimate ABC's the cost of general stock.

d) Estimate ABC's weight of debt based on its market value.

e) Estimate ABC's weight of preferred stock based on its market value.

f) Estimate ABC's weight of common stock based on its market value.

g) Estimate WACC for favoured.

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M914489

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