You are given the following information for Watson Power Co. Assume the company’s tax rate is 22 percent. Debt: 12,000 6.1 percent coupon bonds outstanding, $1,000 par value, 27 years to maturity, selling for 109 percent of par; the bonds make semiannual payments. Common stock: 450,000 shares outstanding, selling for $63 per share; the beta is 1.14. Preferred stock: 19,500 shares of 3.9 percent preferred stock outstanding, currently selling for $84 per share. The par value is $100 per share. Market: 5 percent market risk premium and 4.9 percent risk-free rate. What is the company's WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

You are given the following information for Watson Power Co. Assume the company’s tax rate is 22 percent.

Debt:	12,000 6.1 percent coupon bonds outstanding, $1,000 par value, 27 years to maturity, selling for 109 percent of par; the bonds make semiannual payments.
Common stock:	450,000 shares outstanding, selling for $63 per share; the beta is 1.14.
Preferred stock:	19,500 shares of 3.9 percent preferred stock outstanding, currently selling for $84 per share. The par value is $100 per share.
Market:	5 percent market risk premium and 4.9 percent risk-free rate.

What is the company's WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

WACC is 8.37% Explanation Note: Intermediate answers are shown below as rounded, but the full answer was used to complete the calculation.​   We will begin by finding the market value of each type of financing. We find:   MVD = 12,000($1,000)(1.09) = $13,080,000 MVE = 450,000($63) = $28,350,000 MVP = 19,500($84) = $1,638,000 And the total market value of the firm is:   V = $13,080,000 + 28,350,000 + 1,638,000 V = $43,068,000   Now, we can find the cost of equity using the CAPM. The cost of equity is:   RE = .049 + 1.14(.05) RE = .1060, or 10.60%   The cost of debt is the YTM of the bonds, so:   P0 = $1,090 = $30.50(PVIFAR%,54) + $1,000(PVIFR%,54) R = 2.729% YTM = 2.729% × 2 = 5.46%   And the aftertax cost of debt is:   RD = (1 – .22)(.0546) RD = .0426, or 4.26%   The cost of preferred stock is:   RP = $3.90/$84 RP = .0464, or 4.64%   Now we have all of the components to calculate the WACC. The WACC is:   WACC = .0426(13.080/43.068) + .1060(28.350/43.068) + .0464(1.638/43.068) WACC = .0845, or 8.45%   Notice that we didn’t include the (1 – TC) term in the WACC equation. We used the aftertax cost of debt in the equation, so the term is not needed here.