Question
Covid-19 Fighter AB has 10 million shares of equity outstanding. The current share price is 50 SEK, and the book value per share is 5
Covid-19 Fighter AB has 10 million shares of equity outstanding. The current share price is 50 SEK, and the book value per share is 5 SEK. The company also has two bond issues outstanding. The first bond issue has a face value of 100Million SEK (MSEK) and an 8 per cent coupon with semiannual coupon payments, sells for 90 per cent of par, and matures in 6 months. The second issue has a face value of 60Million SEK (MSEK) and an 8 per cent coupon with semiannual coupon payments and sells for 86.4 per cent of par and matures in 6 months. In both bonds, there is no payment today. Suppose the companys equity has a beta of 2. The risk-free rate is 5 per cent, and the market premium is 10 per cent. Assume that the overall cost of debt is the weighted average implied by the two outstanding debt issues. Both bonds make semi-annual payments. The tax rate is 35 per cent.
Calculcate: 1. Return of Equity
2. YTM of each bond
3. The weighted average after-tax cost of debt
4. Companys WACC?
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