1. Company AFLAC had issued a 12-year coupon bond with 8% coupon rate on the face value as $1,000 and with semi-annual payments. Answer the following questions:

2 million shares of common stock issued; 50,000 shares of preferred stock issued; and 300,000 bonds issued

a) Suppose the discount rate for the bond is given as 10%, what is the present value of the bond?

b) Suppose the current market price of the bond is given as $906 per bond, what is the current market discount rate (or so called Yield to Maturity) for the bond?

c) The company also issued a common stock of $0.78 dividend with 10% growth rate. There is also one preferred stock issued with preferred dividend as $1.62 and preferred stock price as $10 per share. The current common stock price is $14.20/ per share, the corporate income tax rate is 25%. What is the Weighted Average Cost of Capital (WACC) for Company AFLAC?

d) What are the assumptions for Weighted Average Cost of Capital (WACC)?