Question

10 Information on Lightning Power Co., is shown below. Assume the company's tax rate is 21 percent Debt: 16,000 6.2 percent coupon bonds outstanding. $1,000 par value, 25 years to maturity, selling for 108 percent of par; the bonds make semiannual payments. Skipped Common stock Preferred stock 535,000 shares outstanding, selling for $81 per share: beta is 1.20. 20.000 shares of 4.2 percent preferred stock outstanding, currently selling for $92 per share. The par value is $100. Market 7 percent market risk premium and 3.1 percent risk-free rate Calculate the company's WACC. (Do not round Intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) WACC

Answer 1

0176 x r fix =+C176/$C$185 A B Market value weights 0.6939 175 Cost% WACC (Cost %xWeights) 7.98% Market value $ 43,335,000 =535000*81 11.50% =3.1%+1.2*7% 176 Common equity 177 178 179 Preferred stock 180 181 182 Debt $ 0.0295 0.13% 4.57% =4.2/92 1,840,000 =20000*92 0.2767 1.22% 4.425% =RATE(25*2,62/2,-1080,1000,0)*2*(1-21%) $ 17,280,000 =16000*1080 183 184 185 186 Total $ 62,455,000 1.0000 187 Weighted average cost of capital (WACC) 9.34%

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