Question
The next 4 questions are related to Saunders Company that has the following financing outstanding. Debt: 100,000 bonds with a coupon rate of 6 percent
The next 4 questions are related to Saunders Company that has the following financing outstanding.
Debt:
100,000 bonds with a coupon rate of 6 percent and a current price quote of 108
percent of par value; the bonds have 20 years to maturity; the par value is $1,000.
Preferred stock:
190,000 shares of 4 percent preferred stock with a current price of $72, and a par
value of $100.
Common stock:
3,000,000 shares of common stock; the current price is $58, and the beta of the
stock is 1.15.
Market:
The corporate tax rate is 30 percent, the market risk premium is 5 percent, and
the risk free rate is 2 percent.
What is the cost of debt for Saunders? What is the cost of preferred stock for the firm? What is the cost of common stock for the firm? What is the company's WACC
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