I cant figure out the WACC ( fully written out with calculations) I did the debt,equity, and preferred stock?

NOTE: We do not resell pre-written papers. Upon ordering a paper, we custom-write an original paper exclusively for you. Please proceed and order an original paper to enjoy top grades.


Order a Similar Paper Order a Different Paper

Scenario: You work for an investment banking firm and have been asked by management of Vestor Corporation (not real), a software development company, to calculate its weighted average cost of capital, to use in evaluating a new company investment. The firm is considering a new investment in a warehousing facility, which it believes will generate an internal rate of return of 11.5%. The market value of Vestor’s capital structure is as follows:

Source of Capital

Market Value

Bonds

$10,000,000

Preferred Stock

$2,000,000

Common Stock

$8,000,000

To finance the investment, Vestor has issued 20 year bonds with a $1,000 par value, 6% coupon rate and at a market price of $950. Preferred stock paying a $2.50 annual dividend was sold for $25 per share. Common stock of Vestor is currently selling for $50 per share and has a Beta of 1.2. The firm’s tax rate is 34%. The expected market return of the S&P 500 is 13% and the 10-Year Treasury note is currently yieldin what discount rate (WACC) Vestor should use to evaluate the warehousing facility project.

Cost of debt = (1 – tax rate) so, 1 – 34% =.66 and using I/Y which = 6.45%, the equation is then 6.45% X .66 = 4.26%

cost of equity .035 + 1.2 (.13 – .035) .035 + 1.2(.095) = .149 = 14.9%

"Is this question part of your assignment? We can help"

ORDER NOW
Writerbay.net

Do you need help with an assignment? We work for the best interests of our clients and maintain professionalism to offer brilliant writing services in most of academic fields—ranging from nursing, philosophy, psychology, biology, finance, accounting, criminal justice, mathematics, computer science, among others.


Order a Similar Paper Order a Different Paper