(Defining capital structure weights) Templeton Extended Care Facilities, Inc. is considering the acquisition of a chain of cemeteries for $400 million. Since the primary asset of this business is real estate, Templeton's management has determined that they will be able to borrow the majority of the money needed to buy the business. The current owners have no debt financing but Templeton plans to borrow $300 million and invest only $100 million in equity in the acquisition. What weights should Templeton use in computing the WACC for this acquisition?
The appropriate wd weight is __ %. (Round to one decimal place)
(Individual or component costs of capital) Compute the cost of capital for the firm for the following:Compute each in % (Round to two decimal places)..
1. A bond that has a $1,000 par value (face value) and a contract or coupon interest rate of 11%. The bonds have a current market value of $1,125 and will mature in 10 years. The firm's marginal tax rate is 34%.
2. A new common stock issue that paid a $1.80 dividend last year. The firm's dividends are expected to continue to grow at 7% per year forever. The price of the firm's common stock is now $27.50.
3. A preferred stock that sells for $125, pays a 9% dividend and has a $100 par value that is selling at par.
4. A bond selling to yield 12% where the firm's tax rate is 34%.