Given the Information About Accidental Petroleum in the Previous Problem

question 55

Short Answer

Given the information about Accidental Petroleum in the previous problem, calculate the company's weighted average cost of capital assuming that its new financing will consist of 30% debt, 60% equity, and 10% preferred stock. $\begin{array}{llll}&&&\text { Component }\\\text { Component } & \text { Weight } & \text { Cost } & \text { Cost } \\\hline\text { Debt (aftertax) } & .30 & .0474 & .0142 \\\text { Preferred stock } & .10 & .1095 & .0110 \\\text { Equity } & .60 & .1316 & .0790 \\&&&.1042\end{array}$

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Definitions:

No-par Stock

Shares issued without a par value listed on the face of the stock certificate, allowing the company more flexibility in setting their value.

Redemption Value

The value at which a bond or other debt security can be redeemed before its maturity by the issuer.

State Of Incorporation

The specific state within the United States where a corporation is registered to conduct business under its laws.

Market Value

The going rate for an asset or service to be either bought or sold in a marketplace.