Question
The Saunders Investment Bank has the following financing outstanding. Debt: 90,000 bonds with a coupon rate of 12 percent and a current price quote of
The Saunders Investment Bank has the following financing outstanding. |
Debt: | 90,000 bonds with a coupon rate of 12 percent and a current price quote of 114; the bonds have 20 years to maturity. 260,000 zero coupon bonds with a price quote of 19 and 30 years until maturity. Assume semiannual compounding. |
Preferred stock: | 180,000 shares of 10 percent preferred stock with a current price of $73, and a par value of $100. |
Common stock: | 2,900,000 shares of common stock; the current price is $59, and the beta of the stock is 1.2. |
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? |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started