Name: 3. The Yakuza Corporation has 3 million shares of common stock outstanding with a current price of $26 per share; 450,000 shares of preferred stock currently trading at $62 and paying an $8 annual dividend per share; and 50,000 bonds outstanding with a yield to maturity of 8.18% and $900 price per bond. The firm has a beta of 1.5 and a tax rate of 40%. U.S. Treasuries are currently yielding 4% per year, and the expected market return for the following year is 10%.
a. What are the market value weights for equity, debt, and preferred stock?
b. What is the firm’s weighted average cost of capital, WACC?
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