Information on Lightning Power Company, is shown below. Assume the company's tax rate is 22 percent. 18,200 6.1 percent coupon bonds outstanding, $1,000 par value, 25 years to maturity, selling for 107.8 percent of par; the bonds make semiannual payments. 620,000 shares outstanding, selling for $85.25 per share; beta is 1.15. Debt: Common stock: Preferred stock: Market: 28,500 shares of 4.25 percent preferred stock outstanding, currently selling for $92.70 per share. The par value is $100. 6.8 percent market risk premium and 3.4 percent risk-free rate. What is the company's cost of each form of financing? Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32. Cost of equity Aftertax cost of debt Cost of preferred stock % % 4.59 %
Information on Lightning Power Company, is shown below. Assume the company's tax rate is 22 percent. 18,200 6.1 percent coupon bonds outstanding, $1,000 par value, 25 years to maturity, selling for 107.8 percent of par; the bonds make semiannual payments. 620,000 shares outstanding, selling for $85.25 per share; beta is 1.15. Debt: Common stock: Preferred stock: Market: 28,500 shares of 4.25 percent preferred stock outstanding, currently selling for $92.70 per share. The par value is $100. 6.8 percent market risk premium and 3.4 percent risk-free rate. What is the company's cost of each form of financing? Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32. Cost of equity Aftertax cost of debt Cost of preferred stock % % 4.59 %
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
![Information on Lightning Power Company, is shown below. Assume the company's tax rate is 22 percent.
18,200 6.1 percent coupon bonds outstanding, $1,000 par value, 25
years to maturity, selling for 107.8 percent of par; the bonds
make semiannual payments.
620,000 shares outstanding, selling for $85.25 per share; beta is
1.15.
28,500 shares of 4.25 percent preferred stock outstanding,
currently selling for $92.70 per share. The par value is $100.
6.8 percent market risk premium and 3.4 percent risk-free rate.
Debt:
Common stock:
Preferred stock:
Market:
What is the company's cost of each form of financing?
Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.
Cost of equity
Aftertax cost of debt
Cost of preferred stock
Calculate the company's WACC.
Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.
WACC
%
%
4.59 %
9.18 %](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F37fdbc5d-d38e-4e49-a32a-33a2026f13e1%2Fc80e6566-b8a1-417f-9b25-127bbc46ce94%2Fy0vnooe_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Information on Lightning Power Company, is shown below. Assume the company's tax rate is 22 percent.
18,200 6.1 percent coupon bonds outstanding, $1,000 par value, 25
years to maturity, selling for 107.8 percent of par; the bonds
make semiannual payments.
620,000 shares outstanding, selling for $85.25 per share; beta is
1.15.
28,500 shares of 4.25 percent preferred stock outstanding,
currently selling for $92.70 per share. The par value is $100.
6.8 percent market risk premium and 3.4 percent risk-free rate.
Debt:
Common stock:
Preferred stock:
Market:
What is the company's cost of each form of financing?
Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.
Cost of equity
Aftertax cost of debt
Cost of preferred stock
Calculate the company's WACC.
Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.
WACC
%
%
4.59 %
9.18 %
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