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##### FIN- Given the following information for Syarikat Co., find the WACC

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Question;Final Exam (Part II) 50 pointsGiven the following information for Syarikat Co., find the WACC. The company's tax rate is 35%.Debt: 7,000 8% coupon bonds outstanding, 20 years to maturity, selling for 104% of par, bonds make semiannual paymentsCommon Stock: 120,000 shares outstanding, selling for $82 per share, beta is 1.20Preferred Stock: 10,000 shares preferred stock outstanding, $8.25 dividend, currently selling for $80 per shareMarket: 7% market risk premium and 4.5% risk-free rateSyarikat CompanyTax Rate (T)35%Your task is the following:To find the weighted average cost of capital. But in oder to do so, you must find all the other component costs first.For instance in the case of debt, you must know the coupon rate, par value, years to maturity, payment, number of bonds outstanding,current price, and total value of the debt and the cost of debt before and after tax. You MUST show each calculation and the the final cost of debt.To simplify matters for you, all the variables are listed in the box for cost of debt. The same thing applies to the other costs and for calculating the weights.Using all these information, you calculate the WACC.DebtCoupon RatePar ValueYears to maturityPayment ScheduleNumber of bondsPrice as percent of par valueCurrent Price (Par value * selling % of par)Common StockP0BetaMarket PremiumRisk-free RateShares outstandingTotal Value (# shares * share price)Semi-annualTotal Value (# bonds * price per bond)rs = Rf + (RM - Rf)?sFVPVCost of Internal Equity rs =NPMTI/Y =Cost of Debt (Annual YTM) rd =WeightsPreferred StockP0Shares outstandingDividendTotal Value (# shares * share price)r P = D / P0Total Market Value of the Firm = Total Value of Debt + Total Value of CS + Total Value of PSTotal Market Value of the Firm =Cost of Preferred stock rP =Weight of Debt wd = Value debt / value of the firimWeight of CS wc = value of common stock / value of the firmWACC = wc * rs + wp * rp + wd * rd * (1-T)Weight of PS wp = value of preferred stock / value of the firmWACC =WACC =qattachments_0cd5b0439924e1e14b88b9722a40b07d58151b49.xlsxWACC Begin

Paper#50085 | Written in 18-Jul-2015

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