Answer:
9.72%
Explanation:
Maturity = 34
Par-value = -1000
Coupon rate = 6%
Coupon PMT = -60
Value of bond = 1152
Semi-annual Yield = Rate(34, -60, 1162, -1000, 0, 0)
Semi-annual Yield = 5.00%
Annual Yield = 10%
Tax rate = 40%
After tax cost of debt = 10*(1-0.4)= 6%: Add: Flotation cost (5%) = 11%
Cost of preferred stock = Dividend/Price = 12/120 = 10%
Cost of equity = Risk free rate + Beta*Market risk premium
Cost of equity = 3.72 + 0.94*6
Cost of equity = 9.36%
Particulars  Value per    No of        Market   Weight  Cost of     Product
                     security    securities     value                    security	
Bonds             1162       100000     116200000   0.15784   11          1.736213
P. stock           120        1000000  120000000  0.16299   10         1.62999
Equity              100        5000000 <u>500000000</u> <u>0.6792</u>   9.36       <u>6.35697</u>
                                                        736200000     1                         <u>9.72317</u>
So, the WACC of the firm is 9.72%