Answer:
Market Value of equity = Price of equity*Number of shares outstanding
Market Value of equity = 36*45000
Market Value of equity = 1620000
Market Value of Bond = Par value*bonds outstanding*%age of par
Market Value of Bond = 100*11000*1.04
Market Value of Bond = 1144000
Market Value of Bond of Preferred equity=Price*Number of shares outstanding
Market Value of Bond of Preferred equity=52*35000
Market Value of Bond of Preferred equity = 1820000
Market Value of firm = Market Value of Equity + Market Value of Bond+ Market Value of Preferred equity
Market Value of firm = 1620000+1144000+1820000
Market Value of firm = 4584000
Weight of equity = Market Value of Equity/Market Value of firm
Weight of equity = 1620000/4584000
Weight of equity = 0.3534
Weight of debt = Market Value of Bond/Market Value of firm
Weight of debt = 1144000/4584000
Weight of debt = 0.2496
Weight of preferred equity = Market Value of preferred equity/Market Value of firm
Weight of preferred equity = 1820000/4584000
Weight of preferred equity =0.397
Cost of equity
Price= Dividend in 1 year/(cost of equity - growth rate)
36 = 2.2/ (Cost of equity - 0.04)
Cost of equity% = 10.11
After tax cost of debt = cost of debt*(1-tax rate)
After tax cost of debt = 8*(1-0.4)
After tax cost of debt = 4.8
Cost of preferred equity
Cost of preferred equity = Preferred dividend/price*100
Cost of preferred equity = 2.2/(52)*100
Cost of preferred equity = 4.23
WACC = After tax cost of debt*W(D)+cost of equity*W(E)+Cost of preferred equity*W(PE)
WACC = 4.8*0.2496+10.11*0.3534+4.23*0.397
WACC = 6.45%
