Question
The Saunders Investment Bank has the following financing outstanding. Debt 140,000 bonds with a coupon rate of 10 percent and a current price quote of
The Saunders Investment Bank has the following financing outstanding.
Debt 140,000 bonds with a coupon rate of 10 percent and a current price quote of 114; the bonds have 20 years to maturity. 310,000 zero coupon bonds with a price quote of 16.5 and 30 years until maturity. Both bonds have a par value of $1,000. Assume semiannual compounding.
Preferred Stock: 230,000 shares of 8 percent stock with a current price of $ 68 and a par value of $100
a) What is the cost of debt for the company?
b) What is the cost of stock for the company?
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Corporate Finance Core Principles and Applications
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford
3rd edition
978-0077971304, 77971302, 978-0073530680, 73530689, 978-0071221160, 71221166, 978-0077905200
