Whole Foods Market is company with over $1 billion in annual sales. The firm, which operates under the ticker symbol WFMI uses bonds, preferred stock, and common stock for funding.
- Whole Foods bonds each sell for $935, pay coupons of $20 every six months, and have 8 years remaining to maturity. The par value of the bonds is $1,000. The total market value of the bonds is currently $929.2 million.
- Whole Foods has preferred stock as well which carries a total market value of $425 million. Each share sells for $25 and pays a dividend of $0.50 quarterly.
- Whole Foods has 140.3 million shares of common stock outstanding. Each share of stock is selling for $18.50.
Other information:
- The risk-free rate is currently 3%, and you believe the market risk premium is 6%.
- According to ValueLine, WFMI's beta is 1.05. Yahoo reports WFMI's beta to be 0.95. You decide to use an average of the two sources for this problem, resulting in a beta of 1.00.
- Also according to ValueLine, WFMI's tax rate is 41%.
According to the data above, calculate WFMI's Weighted Average Cost of Capital.