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Currently, LampSmart has two bonds listed in the Mergent Bond Record: a $500 million amount outstanding of 8.5% coupon bond due 2018 trading at 105% of par with a YTM of 7.2%; a $900 million amount outstanding of 6.25% coupon bond due 2022 trading at 99% of par with a YTM of 6.8%. LampSmart also has 2 million shares of preferred stocks outstanding with book value of $120 per share. The cumulative annual dividend is 10.0%. The preferred stock is selling for $140. The company's common stock is selling at $42 per share which paid quarterly dividend of $0.40 last year. The expected quarterly dividend is $0.44. The total number of share outstanding is 100 million. LampSmart's marginal tax rate is 29%.

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

b) Estimate LampSmart's cost of preferred stock.

c) Estimate LampSmart's cost of common stock.

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

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

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

g) Estimate WACC for LampSmart.

Please round all intermediate calculations to 4-decimal places and round final answers to 2-decimal places when applicable.

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M939065

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