Answered step by step
Verified Expert Solution
Question
1 Approved Answer
A firm has a corporate bond traded in the secondary market. The maturity of this bond is 5 years and annual coupon interest rate is
A firm has a corporate bond traded in the secondary market. The maturity of this bond is 5 years and annual coupon interest rate is 12.5%. The bond pays annual coupons and par value is 100$. The market price of this bond is 94.5$. The expected dividend for the next year is 0.75$ per share and the market price of one share is 12$. The corporate tax rate is 20%, the beta of the firm is 1.1, the risk free rate is 9%, and the market risk premium is 6%. The firm targets a debt/equity ratio of 0.5. Estimate the approximate WACC for this firm.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started