Zhou Bakery has 5.5 million shares of common stock outstanding selling for $20 per share on the market. Zhou has preferred stock outstanding with a market value of $14 million. The bakery maintains a beta of 1.2, and the risk free rate and market risk premium are 4% and 8.33%, respectively. The bakery also has 22,000 bonds selling for 90% of face value- the bonds mature in 15 years and have a coupon rate of 7.5%; interest paid annually. Total preferred dividends are $1.4 million. Find the WACC for Zhou if the tax rate is 35%.
Zhou Bakery has 5.5 million shares of common stock outstanding selling for $20 per share on themarket. Zhou has preferred stock outstanding with a market value of $14 million. The bakerymaintains…
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