Sky Corporation has issued 18,000 bonds with a market price of $110 per bond

Finance Aug 30, 2020

Sky Corporation has issued 18,000 bonds with a market price of $110 per bond. Sky also has 29,000 common shares outstanding at a price of $80 per share. If the common shares will pay a dividend of $4.5 at the end of the year and thereafter dividends will grow at a rate of 3 percent. Given that the after-tax yield on the firm's bonds is 7%.

Required:

Based on the above information, calculate the Sky Corporation's weighted average cost of capital (WACC).

Expert Solution

So, Sky Corporation's weighted average cost of capital (WACC) is 7.88%.

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