Question
The Saunders Investment Bank has the following financing outstanding. Debt: 10,000 bonds with a coupon rate of 11 percent and a current price quote of
The Saunders Investment Bank has the following financing outstanding. |
Debt: | 10,000 bonds with a coupon rate of 11 percent and a current price quote of 109.5; the bonds have 20 years to maturity. 180,000 zero coupon bonds with a price quote of 20 and 30 years until maturity. Assume semiannual compounding. |
Preferred stock: | 100,000 shares of 9 percent preferred stock with a current price of $84, and a par value of $100. |
Common stock: | 2,100,000 shares of common stock; the current price is $70, and the beta of the stock is 1.4. |
Market: | The corporate tax rate is 35 percent, the market risk premium is 6 percent, and the risk-free rate is 3 percent. |
What is the WACC for the company? |
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