Answer:
8.57%
Explanation:
value of debt = $1,000 x 9,200 x 1.045 = $9,614,000
YTM = {32 + [($1,000 - $1,045)/46]} / [($1,000 + $1,045)/2] = 31.02/ 1,022.50 = 3.034% x 2 = 6.07%
value of common stock = 235,000 x $64.70 = $15,204,500
Re = 3.7% + 0.92(11.8% - 3.7%) = 11.15%
value of preferred stocks = 8,200 x $94.20 = $772,440
cost of preferred stocks = 4.6 / 94.2 = 5.46%
total value = $25,590,940
common stocks = 0.594
debt = 0.376
preferred stocks = 0.03
WACC = (0.594 x 11.15%) + (0.03 x 5.46%) + (0.376 x 6.07% x 0.78) = 6.6231% + 0.1638% + 1.78% = 8.57%
