Question
The Saunders Investment Bank has the following financing outstanding. Debt: 100,000 bonds with a coupon rate of 6 percent and a current price quote of
The Saunders Investment Bank has the following financing outstanding.
Debt: 100,000 bonds with a coupon rate of 6 percent and a current price quote of 108; the bonds have 20 years to maturity. 270,000 zero coupon bonds with a price quote of 18.5 and 30 years until maturity. Assume semiannual compounding.
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 WACC for the company?
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