Question
A firm plans to sell 12 million shares of common stock and 200,000 bonds. Each bond will have a coupon rate of 5% and will
A firm plans to sell 12 million shares of common stock and 200,000 bonds. Each bond will have a coupon rate of 5% and will have a face value of $1,000. The common stock will be issued at a price of $19.50 a share. The bonds will sell for 89% of face value. The after-tax cost of debt is 4% and the cost of equity is 9.275%. What is the firm's WACC?
7%
9%
6%
8%
Bobs Balloons has 80,000 bonds outstanding that are selling at par value. Bonds with similar characteristics are yielding 8.5%. The company also has 4 million shares of common stock outstanding. The stock has a beta of 1.1 and sells for $40 a share. The U.S. Treasury bill is yielding 4% and the market risk premium is 8%. Jack's tax rate is 35%. What is Jack's weighted average cost of capital?
10.38%
7.10%
11.37%
7.39%
A firm plans to sell 12 million shares of common stock and 200,000 bonds. Each bond will have a coupon rate of 5% and will have a face value of $1,000. The common stock will be issued at a price of $19.50 a share. The bonds will sell for 89% of face value. The after-tax cost of debt is 4% and the cost of equity is 9.275%. What is the firm's WACC?
7%
9%
6%
8%
Bobs Balloons has 80,000 bonds outstanding that are selling at par value. Bonds with similar characteristics are yielding 8.5%. The company also has 4 million shares of common stock outstanding. The stock has a beta of 1.1 and sells for $40 a share. The U.S. Treasury bill is yielding 4% and the market risk premium is 8%. Jack's tax rate is 35%. What is Jack's weighted average cost of capital?
10.38%
7.10%
11.37%
7.39%
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