7/21/2019 Delona w8 Assignment

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Working with the debt:

n= 20

c= 10%

PMT $100

FV  $1,000

i 9%

PV of a single bond therefore; =$1,091

Total value of debt= $1,091.2!"1000, = $1,091,2!.

Working with the preferred stock:

i 10%

Di $ !"#0

PV

 $

!# TotPrice

 $ 1#0,000

Working with the e&'it(:

Total value of e#uit = 120,000" $1., = $1,&'&,(00

 Trget Weights

Total = Value of debt) value of *referred stoc+) value of e#uit

= $2,9&,!

es*ective -eights

Wd = '&%Wp= !%/e= !%

)ost of e&'it(:

e= '%) 1.2" 10%'%

=11.%

W*)) cc'tion:/344= Wd"rd 1t ) /e"re ) Wp"rp=0.'&"0.09"10. ) 0.!"0.11 ) 0.0!"0.1

=1.9% ) (.(!% )0.!%= 9.13%