Question 6.
The Riddle Corp. have the following financing outstanding.
Debt:
20,000 bonds with a coupon rate of 12 percent and a current price quote of 110.0;
the bonds have 20 years to maturity. 190,000 zero coupon bonds with a price
quote of 20.5 and 30 years until maturity.
Preferred
stock:
110,000 shares of 10 percent preferred stock with a current price of $85, and a
par value of $100.
Common stock: 2,200,000 shares of common stock; the current price is $71, and the beta of the
stock is 1.45.
Market:
The corporate tax rate is 30 percent, the market risk premium is 5 percent, and
the risk-free rate is 2 percent.
What is the WACC for the company?