Question
Please answer this question in excel and show formulas. Vaughn Manufacturing (VM) has 720 bonds outstanding with a 7.75 percent coupon rate (semi-annual coupon payments)
Please answer this question in excel and show formulas.
Vaughn Manufacturing (VM) has 720 bonds outstanding with a 7.75 percent coupon rate (semi-annual coupon payments) and 10 years left to maturity. The bonds sell at 91% of their $1,000 face value. VMs common stock has a beta of 1.08. The 10-year Treasury-Bond rate is currently 2.75 percent, and historically, the market has earned 6.5% more per year than the 10-year Treasury rate. The firm has 167,000 shares of common stock outstanding at a market price of $23.50 a share (book value of $12 per share). There are 40,000 shares of preferred stock outstanding at a market price of $30 a share (book value of $40 per share). The preferred stock pays a $2.65 annual dividend. The companys marginal tax rate is 33 percent. a. What is the YTM on the bonds? (3 points) b. What is the cost of preferred stock? (3 points) c. What is the cost of common stock? (3 points) d. What is the weighted average cost of capital for Vaughn Manufacturing? (3 points)
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