Problem:
Given the following information for Bellevue Power Co., find the WACC. Assume the company's tax rate is 31%.
DEBT: 4,800 8% coupon bonds outstanding, $1,000 par value, 21 years to maturity, selling for 103% of par, the bonds make semiannual payments.
COMMON STOCK: 94,500 shares outstanding, selling for $62 per share; the beta is 1.15.
PREFERRED STOCK: 14,500 shares of 7.5% preferred stock outstanding, currently selling for $105 per share.
MARKET: 9% market risk premium and 7% risk-free rate.