Posted: May 4th, 2016

what is the future value of your retirement after 12 years?

Based on the information below, calculate the weighted average cost of capital.

Great Corporation has the following capital situation.
Debt: One thousand bonds were issued five years ago at a coupon rate of 8%. They had 25-year terms and $1,000 face values. They are now selling to yield 9%. The tax rate is 39%
Preferred stock: Two thousand shares of preferred are outstanding, each of which pays an annual dividend of $7.50. They originally sold to yield 15% of their $50 face value. They’re now selling to yield 8%.
Equity: Great Corp has 133,000 shares of common stock outstanding, currently selling at $12.48 per share. Dividend expected for next year is $.80 and the growth rate is 6%.

Question 1
You deposit $8,000 into a retirement account at the end of the next 12 years earning 10% interest, what is the future value of your retirement after 12 years?

Question 2
You will receive $2,000 at the end of the next 12 years, assuming a 6% discount rate, what is the present value of the cash flows?