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Ngala LLC has 5,000 bonds outstanding which are currently priced at $1,200 each. The bonds pay a coupon of 7.6% (paid semiannually) and mature in 7 years. The bonds have a face value of $1,000 each. Additionally, the firm has 350,000 shares of $2 par value common stock outstanding priced at $40 per share. The firm believes that the market risk premium is currently 6.5% and the risk-free rate is 4.25%. The firm’s beta is 1.40. What is the firm’s weighted average cost of capital? The firm is in the 39% tax bracket. Determine (a) the weights of each source of capital in the capital structure; (b) the cost of debt; (c) the cost of equity capital; and (d) the WACC.

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Operation Management, Management Studies

Category:- Operation Management
Reference No.:- M91626176

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