The following balance sheet extract relates to the ABC Company
Bonds Payable $1,600,000
Common Stock $5,000,000
Preferred Shares $2,550,000
Additional Information:
i. The bonds are 8%, annual coupon bonds, with 9 years to maturity and are currently selling for 95% of par.
ii. The company's common shares which have a book value of $25 per share are currently selling at $28 per share. The beta on the company's stock is 0.7
iii. Preferred shares have a book value of $100 per share. These shares are currently selling at $120 per share and carries a coupon rate of 6%.
iv. Market Risk premium is 7 % and 3% is the risk-free rate.
v. Company's Tax rate is 30%
Required: Determine the following for the company
(a) Total Market value (b) After-tax Cost of Debt (c) Cost of Common Stock (d) Cost of Preferred Stock (e) WACC