(Answered) The following balance sheet extract relates to the abc

Accounting

The following balance sheet extract relates to the ABC Company

Bonds Payable $1,600,000

Common Stock $5,000,000

Preferred Shares $2,550,000

Additional Information:

i. The bonds are 8%, annual coupon bonds, with 9 years to maturity and are currently selling for 95% of par.

ii. The company's common shares which have a book value of $25 per share are currently selling at $28 per share. The beta on the company's stock is 0.7

iii. Preferred shares have a book value of $100 per share. These shares are currently selling at $120 per share and carries a coupon rate of 6%.

iv. Market Risk premium is 7 % and 3% is the risk-free rate.

v. Company's Tax rate is 30%

Required: Determine the following for the company

(a) Total Market value (b) After-tax Cost of Debt (c) Cost of Common Stock (d) Cost of Preferred Stock (e) WACC

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