Question
A. JS Inc. has been financed using both debt and equity. The company has outstanding a 20-year, $1,000,000 par value bond that was issued in
A. JS Inc. has been financed using both debt and equity. The company has outstanding a 20-year, $1,000,000 par value bond that was issued in 2005 (today is 2018) and that carries a 10% coupon rate, and tomorrow, a 20-year bond with a par value of $1,000,000 carrying a coupon rate of 8% will be issued. JS has preferred stock outstanding (25,000 shares, market price = $75) with a dividend yield of 5.5%. JS has issued 100,000 shares of common stock, and its most recent market price was $32.50 per share.
B. Presently, the T-bill rate is 4%, and analysts have estimated that the market will return its historical average, which is 12%. The most recent S&P report on JS Inc. listed a beta of .95. The companys tax rate is 40%, and the company uses wacc as its discount rate for projects. What is the WACC for JS Inc.?
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