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Use the information below to calculate the Weighted Average Cost of Capital [WACC] for Roadrunner Enterprises

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Use the information below to calculate the Weighted Average Cost of Capital [WACC] for Roadrunner Enterprises.

The company has the following components of its capital structure:

DEBT:       22,750 bonds outstanding with a 6.5% coupon rate, paid annually.  

                        Each bond has $1,000 par value with a 30-year stated maturity, 

            and were issued five years ago.

            The bonds currently sell for 85% of par in the market.

PREFERRED STOCK:

                        There are 29,400 shares of preferred stock outstanding.

                        The shares sell for $82.31 in the market.

            They pay an annual cash dividend of $8.85 per share.

COMMON STOCK:

                        There are 355,000 shares of common stock outstanding.

            The shares sell for $83.25 in the market and pay an annual cash dividend of $2.35 per share.

            The stock has a beta of 1.53.

 

The company has a corporate tax rate of 30%.

The expected return of the "Market"; that is, the S&P500 is 10.12% per year.

T-bills are expected to return 3.58% per year.

Q20: What's the weight of debt in the capital structure?

Q21: What's the weight of preferred stock in the capital structure?

Q22: What's the weight of common stock in the capital structure?

Q23:   What is Roadrunner's after-tax cost of debt?

Q24:   What is Roadrunner's cost of preferred stock?

Q25:   What is Roadrunner's cost of common stock?

Q26:   What is Roadrunner's Weighted Average Cost of Capital [WACC}?