LUVFINANCE, Inc. is estimating its WACC. It is operating at its optimal capital structure. Its outstanding bonds have a 12 percent coupon, paid semiannually, a current maturity of 17 years, and sell for $1,162. It has 100,000 bonds outstanding. The firm can issue new 20-year maturity semiannual bonds at par but will incur flotation costs of $50 per bond. The firm could sell, at par, $100 preferred stock that pays a 12 percent annual dividend that is currently selling for $120. The firm currently has 1,000,000 shares of preferred stock outstanding. Rollins' beta is 0.94, the risk-free rate is 3.72 percent, and the market risk premium is 6 percent. The common stock currently sells for $100 a share and there are 5,000,000 shares outstanding. The firm's marginal tax rate is 40 percent. Required:
What is the WACC?

Solution :

Given :

The cost of the debt is yield to the maturity of the bonds.

The yield on the bond is 10%

The tax rate is 40%

After the tax cost of the debt = 10 ( 1- 0.4 )

                                          = 6 %

Add floatation cost at the rate of 5% = 11%

Cost of the preferred stock =

                                             = = 10%

The cost of equity = risk free rate + β x market risk premium

                              = 3.72 + 0.94 x 6

                              = 9.36%

WACC is weighted average of the individual securities :

Particulars  Value per  No. of       Market value   Weight   Cost of    Product

                   security    securities                                         security

Bonds           1162        100,000   116,200,000     0.1578      11         1.73621298

Preferred      120       1,000,000  120,000,000    0.1629     10         1.6299918

stocks

Equity           100        5,000,000 500,000,000   0.6791    9.36      6.356968

                                                      736,200,000       1         WACC    9.7231730

Therefore, WACC of the firm is 9.72%

the correct answer would be b, when, queen, calder hall and london.

explanation:

we always capitalize words when a paragraph or sentence is starting, when an important name is used, when a place is being written, or simply when a noun is used, etc. so in this sentence, sentence is starting from 'when', so it will be written in capital letters. secondly, queen is considered to be an important person, so it will also be written in capital letter. next, the name of the town is mentioned, i-e calder hall, which will also be written in capital letters. in the last,   city name is being used, 'london', which will also be written in capital letters. so option b is the most appropriate one.

lady gaga

explanation:

lady gaga's real name is stefani joanne angelina germanotta.