# Weights for Debt, Common Equity, and Preferred Equity Assignment | Homework For You

The Oriole Products Co. currently has debt with a market value of \$275 million outstanding. The debt consists of 9 percent coupon bonds (semiannual coupon payments) which have a maturity of 15 years and are currently priced at \$1,429.26 per bond. The firm also has an issue of 2 million preferred shares outstanding with a market price of \$14 per share. The preferred shares pay an annual dividend of \$1.20. Oriole also has 14 million shares of common stock outstanding with a price of \$20.00 per share. The firm is expected to pay a \$2.20 common dividend one year from today, and that dividend is expected to increase by 4 percent per year forever. If Oriole is subject to a 40 percent marginal tax rate, then what is the firm’s weighted average cost of capital?

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a) Calculate the weights for debt, common equity, and preferred equity. (Round intermediate calculations and final answers to 4 decimal places, e.g. 1.2514.)

 Debt Preferred equity Common equity

b) Calculate the cost of debt(Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.)

 Cost of debt %

c) Calculate the cost of preferred equity. (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.)

 Cost of preferred equity

d) Calculate the cost of common equity. (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 0 decimal places, e.g. 15%.)

 Cost of common equity

e) What is the firm’s weighted average cost of capital? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.)

 WACC

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