Calculate the individual cost of the following capitals and then calculate the WACC of the company with the following information:
The company has the bonds with 12% coupon rate. The company also has convertible bonds having the coupon rate of 8.1%. The bonds with the same credit risk and rating have the yield of 14%.
The company has the common stock whose current price is $30. The expected dividend which the company is likely to pay is $1.30 per share. The growth rate of the dividends is estimated to be 15.5%, but as per the Wall street the growth rate is expected to be 12%.
The preferred stock of the company has the current price of $60, the dividend against the same is $6.80. Flotation cost of the preferred stock is 3% of the current price of the stock.
Tax rate of the company is 30%.
The capital structure of the company is:
Debt รข€“ 45%
Preferred stock -5%
Remaining is for the common equity.
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