A company's bond has a par value of $1000 and pays a coupon rate of 4%....
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A company's bond has a par value of $1000 and pays a coupon rate of 4%. The current market price of the bond is $890. The bond matures in 8 years. The marginal tax rate is equal to 15%. The required rate of return on the company's shares is 11%. The company is working on a project requiring a total funding of 500,000 KD. Debt funding is estimated to be 100,000 KD and the rest in shares. Answer the following questions: a. Calculate the debt weight Wd Wd b. Calculate the stock weight W Ws c. Calculate the coupon payment. Coupon payment = $ d. Calculate the cost of debt rd. Note: Use two decimal places (example: 0.05, 0.12, 0.09,...) rd e. Calculate the WACC of the project. Note: Include all decimal places WACC = A company's bond has a par value of $1000 and pays a coupon rate of 4%. The current market price of the bond is $890. The bond matures in 8 years. The marginal tax rate is equal to 15%. The required rate of return on the company's shares is 11%. The company is working on a project requiring a total funding of 500,000 KD. Debt funding is estimated to be 100,000 KD and the rest in shares. Answer the following questions: a. Calculate the debt weight Wd Wd b. Calculate the stock weight W Ws c. Calculate the coupon payment. Coupon payment = $ d. Calculate the cost of debt rd. Note: Use two decimal places (example: 0.05, 0.12, 0.09,...) rd e. Calculate the WACC of the project. Note: Include all decimal places WACC =
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To calculate the required values well use the given information and formulas a Debt weight Wa is cal... View the full answer
Related Book For
Foundations Of Finance
ISBN: 9780135160619
10th Edition
Authors: Arthur J. Keown, John H. Martin, J. William Petty
Posted Date:
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