Exam 11: Calculating the Cost of Capital

TAFKAP Industries has 8 million shares of stock outstanding selling at $17 per share and an issue of $20 million in 7.5%, annual coupon bonds with a maturity of 15 years, selling at 109% of par ($1000). If TAFKAP's weighted average tax rate is 34% and its cost of equity is 12.5%, what is TAFKAP's WACC?

TJ Industries has 7 million shares of common stock outstanding with a market price of $20.00 per share. The company also has outstanding preferred stock with a market value of $10 million, and 100,000 bonds outstanding, each with face value $1,000 and selling at 95% of par value. The cost of equity is 12%, the cost of preferred is 10%, and the cost of debt is 6.45%. If TJ's tax rate is 34%, what is the WACC?

A firm has 4,000,000 shares of common stock outstanding, each with a market price of $12.00 per share. It has 25,000 bonds outstanding, each selling for $980. The bonds mature in 20 years, have a coupon rate of 9%, and pay coupons semi-annually. The firm's equity has a beta of 1.5, and the expected market return is 15%. The tax rate is 30% and the WACC is 15%. What is the risk-free rate?

JackITs has 5 million shares of common stock outstanding, 1 million shares of preferred stock outstanding, and 20 thousand bonds. If the common shares are selling for $28 per share, the preferred share are selling for $13.50 per share, and the bonds are selling for 98 percent of par, what would be the weight used for equity in the computation of JackIT's WACC?