Question
An analyst has summarized the information about the outstanding bonds issued by Durnell Inc. in the following table: Year of issue Maturity date Redemption type
An analyst has summarized the information about the outstanding bonds issued by Durnell Inc.
in the following table:
|
| Year of issue | Maturity date | Redemption type | Issue currency | Yield to maturity (YTM) |
| Bond 1 | 2017 | 2028 | At maturity | USD | 5.3% |
| Bond 2 | 2017 | 2028 | At maturity | EUR | 4.5% |
| Bond 3 | 2018 | 2028 | At maturity | EUR | 4.0% |
| Bond 4 | 2018 | 2028 | Callable | EUR | 6.0% |
| Bond 5 | 2010 | 2018 | At maturity | EUR | 5.0% |
| Bond 6 | 1998 | 2018 | At maturity | USD | 4.6% |
| Bond 7 | 2017 | 2028 | At maturity | EUR | 4.9% |
| Bond 8 | 2018 | 2028 | At maturity | EUR | 4.2% |
| Bond 9 | 2017 | 2018 | Convertible | EUR | 2.1% |
Valuation is performed in September 2018 in euros. If the yield on 10-year government bonds is 2%, what is the default spread?
What cost of debt would you use in WACC calculation if the marginal corporate tax rate is 33%?
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