Calculating the WACC.
Calculate the WACC for Widgets Ltd under a classical tax system and imputation system:
Debt: 7000 bonds with a 7.5% coupon rate $1000 face value and a quoted price of $1080. The bonds have twenty years to maturity.
Ordinary shares: 180 000 ordinary shares. The dividends have a growth rate of 6% indefinitely; the current price is $60; and the dividend next year will be
$2.80. The beta of the share is 0.9.
Preference share: 8000 5.50% preference shares with a current price of $94.
Market: The corporate tax rate is 30%; the expected return on the market is 12%; and the risk-free rate is 5%.