Question
Two questions: 1.James Maberry is considering purchasing a bond that pays annual coupons at a rate of 5 percent and matures in 9 years. If
Two questions:
1.James Maberry is considering purchasing a bond that pays annual coupons at a rate of 5 percent and matures in 9 years. If the YTM on this bond is 7.50 percent, how much should James pay for this bond if she purchases the bond today?
2. Nato Fitz Corporation currently has 2 million equity shares outstanding trading at a price of $5 per share with a beta of 1.5. In addition, Nato Fitz Corporation has $3 million in outstanding debt ($3.3 million in current market value) with a current market value of $1100, a coupon rate of 8 percent (annual payments), and 12 years to maturity. If the market risk premium is 7 percent, the risk free rate is 3 percent, and the appropriate tax rate is 15 percent, what is Nato Fitz's WACC?
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