Help Save & Exit 10 Charlotte's Crochet Shoppe has 15

Finance Dec 01, 2020

Help Save & Exit 10 Charlotte's Crochet Shoppe has 15.500 shares of common stock outstanding at a price per share of $75 anive of return of 1177 percent. The company also has 320 bonds outstanding, with a par value of $2.000 per bond. The pretax cost of its 2 percent and the band sell for 984 pcent of par. What is the firm's WACC if the tax rate is 39 percent

Expert Solution

Common stock =15,500 shares × $79=$1,224,500

Bond=320×$2000×0.984=$629,760

Total value=$1,224,500+$629,760=$1,854,260

Weighted average cost of capital=11.77%×($1,224,500÷$1,854,260)

+6.21%×($629,760÷$1,854,260)×(1-0.39)

=7.77%+1.29%=9.06%

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