The Saunders Investment Bank has the following financing outstanding.

Debt: 20,000 bonds with a coupon rate of 12 percent and a current price quote of 110; the bonds have 20 years to maturity. 190,000 zero coupon bonds with a price quote of 20.5 and 30 years until maturity. Assume semiannual compounding.

Preferred stock: 110,000 shares of 10 percent preferred stock with a current price of $85, and a par value of $100.

Common stock: 2,200,000 shares of common stock; the current price is $71, and the beta of the stock is 1.45.

Market: The corporate tax rate is 30 percent, the market risk premium is 5 percent, and the risk-free rate is 2 percent.

Complete the following excel sheet:

Chapter 12 Question 17 Input Area Bond 1 Bonds outstanding Years to Maturity Annual coupon rate Coupons per year Bond price (% of par) Bond 2: Bonds outstanding Years to Maturity Annual coupon rate Coupons per year Bond price (% of par) Common stock Shares outstanding Share price Preferred stock outstanding Shares outstanding Coupon rate Share price Market Market risk premium Risk-free rate Tax rate Step 1: Calculate the market value of each component of capital structure. Step 2: Calculate the capital structure on a % Output Area Capital Structure Mark: Step 3: Use the provided information to calculate the cost of each component of the capital Market Value Bond 1 before tax Bond 1 after tax Bond 2 before tax Bond 2 after tax Bond 1 Bond 2 Common stock Preferred stock Total firmm Preferred WACC Mark: Step 4: Calculate the weighted average cost of 0.00% 49