Question
vanguard inc has two bond issues outstanding. The first bond issue, which matures in 10 years, has a face value of $50 million, a coupon
vanguard inc has two bond issues outstanding. The first bond issue, which matures in 10 years, has a face value of $50 million, a coupon rate of 8%, and sells for 90 percent of par. The second issue, matures in 26 years, has a face value of $90 million, a coupon rate of 12 % and sells for 108 percent of par. Both Bonds makes semiannual payments. The current price for the stock of this company is $11. Suppose the msot recent dividend was $1.5 and the dividend growth rate is 3%. Assume that the overall cost of debt is the weighted average of that implied by the two oustanding debt issues. The tax rate is 35%, and the company has a debt to equity ratio of 0.8 Find COE in p[ercent Find After-tax cost of debt (%) Find WACC (%)
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