Problemmicro spinoffs inc issued 20-year debt a year ago at, Ask an Expert

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Problem:

Micro Spinoffs, Inc., issued 20-year debt a year ago at par value with a coupon rate of 5%, paid annually. Today, the debt is selling at $1,380. The firm's tax bracket is 20%. Micro Spinoffs also has preferred stock outstanding. The stock pays a dividend of $6 per share, and the stock sells for $30. Micro Spinoffs's cost of equity is 22%.

Requirement:

Question: What is its WACC if equity is 50%, preferred stock is 20%, and debt is 30% of total capital?

Note: Please explain comprehensively and give step by step solution.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91171819

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