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Category > Business & Finance Posted 20 Jun 2017 My Price 8.00

You are given the following information concerning Parrothead Enterprises:

You are given the following information concerning Parrothead Enterprises:
Debt:

9,700 7.2 percent coupon bonds outstanding, with 23 years to maturity and a quoted price of 105.75. These bonds pay interest semiannually.
   
Common stock:

260,000 shares of common stock selling for $65.20 per share. The stock has a beta of .92 and will pay a dividend of $3.40 next year. The dividend is expected to grow by 5.2 percent per year indefinitely.
   
Preferred stock: 8,700 shares of 4.6 percent preferred stock selling at $94.70 per share.
   
Market: A 11.3 percent expected return, a risk-free rate of 5.2 percent, and a 30 percent tax rate.
Required:

Calculate the WACC for Parrothead Enterprises.

WACC _____

Organic Produce Corporation has 8.3 million shares of common stock outstanding, 580,000 shares of 7.3 percent preferred stock outstanding, and 183,000 of 8.5 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $64.80 per share and has a beta of 1.28, the preferred stock currently sells for $107.20 per share, and the bonds have 14 years to maturity and sell for 92 percent of par. The market risk premium is 6.95 percent, T-bills are yielding 5.65 percent, and the firmAc€?cs tax rate is 40 percent.
 

(a)

What is the firm's market value capital structure? (Do not round intermediate calculations. Round your answers to 4 decimal places (e.g., 32.1616).)
  
  Market value weight of debt ____   
  Market value weight of preferred stock ____   
  Market value weight of equity _____   

(b)

If the firm is evaluating a new investment project that has the same risk as the firmAc€?cs typical project, what rate should the firm use to discount the projectAc€?cs cash flows?

WACC ____

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Status NEW Posted 20 Jun 2017 06:06 AM My Price 8.00

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