Masterson, Inc., has 8 million shares of common stock outstanding. The current share

WACC=9.26%

Explanation:

Calculation for the company's WACC

First step is to calculate the Total Market Value

Total Market Value = 8,000,000*68+ 65,000,000*93% + 50,000,000*105%

Total Market Value = 544,000,000+60,450,000+52,500,000

Total Market Value = $656,950,000

Second step is to calculate the % Value of Equity,% Value of First Bond and % Value of Second Bond

% Value of Equity =544,000,000/$656,950,000*100

% Value of Equity = 82.81%

% Value of First Bond = 60,450,000/$656,950,000*100

% Value of First Bond= 9.20%

% Value of Second Bond = 52,500,000/$656,950,000*100

% Value of Second Bond =7.99%

Third step is to calculate Ke Using this formula

Ke = Cost of Equity = Dividend/Market Value per share + Growth Rate

Let plug in the formula

Ke = 4.2/68 + 4.3%

Ke= 6.18% + 4.3%

Ke= 10.48%

Last step is to calculate WACC using this formula

WACC = % Value of Equity * Cost of Equity + % Value of Debt * Cost Of Debt (1- Tax Rate)

Let plug in the formula for

WACC= 82.81% * 10.48% + 9.20% * 5% (1-0.24) + 7.99%* 4%(1-0.25)

WACC= 8.67%+ 9.20% * 5%(0.76)+7.99%* 4%(0.76)

WACC= 8.67%+ 9.20% * 3.8%+7.99%* 3.04%

WACC=8.67%+0.35%+0.24%

WACC=9.26%

Therefore the company's WACC will be 9.26%

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