Good afternoon, my question is I don't know how to calculate the cost of capital of WACC. Here is the question.
B1 100,000 bonds with coupon rate of 8% (paid semi-annually), a price quote of 120 and have 30 years to maturity. Semi-annual YTM is 3.24%.
B2 100,000 zero coupon bonds (semi-annual compounding) with a price quote of 30 and 20 years until maturity.
PS: 200,000 shares of 5 percent preferred stock with a current price of $70, and a par value of $100.
Stock: 5,000,000 shares of common stock, with a price of $60, and a beta of 1.2.
Market: The corporate tax rate is 40 percent, the market risk premium is 8%, and the risk-free rate is 3%.
I find that the cost of capital for debt formula is (D/V)*Rd*(1-Tc), but there is no Rd and Re in the question, how could I find them? Thank you.
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WACC calculate question
Calculating the cost of capital is not in the syllabus for Paper FA - it is nothing to do with financial accounting.
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