Equity Information

50 million shares

$80 per share

Beta = 1.15

Market risk premium =

9%

Risk-free rate = 5%

Debt Information

$1 billion in outstanding

debt (face value)

Current quote = 110

Coupon rate = 9%,

semiannual coupons

15 years to maturity

Tax rate = 40%

What is the cost of debt?

N = 30; PV = -1100; PMT = 45; FV = 1000; CPT I/Y = 3.9268

RD= 3.927(2) = 7.854%

question: where are the PV, PMT and FV come from? (how to calculate single bond from entire face amount?)