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Finance

Financial Management

Ford Company

Capital Budgeting Problem

The market value of Fords' equity, preferred stock and debt are $7 billion, $3 billion, and $10 billion, respectively. Ford has a beta of 1.8, the market risk premium is 7%, and the risk-free rate of interest is 4%. Ford's preferred stock pays a dividend of $3.5 each year and trades at a price of $27 per share. Ford's debt trades with a yield to maturity of 9.5%. What is Ford's weighted average cost of capital if its tax rate is 30%?

Ford Company
	Market Capitalization	Weight

Equity (E)
Preferred (P)
Debt (D)
Total

Ford Company
	Weight		Cost		After-tax Marginal Weight

Equity (E)		X		=
Preferred (P)		X		=
Debt (D)		X		=
Total		X		=

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92172354

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