The Saunders Investment Bank has the following financing outstanding. What is the WACC for the company? Debt:

Question:

The Saunders Investment Bank has the following financing outstanding. What is the WACC for the company?

Debt: 50,000 bonds with a coupon rate of 5.7 percent and a current price quote of 106.5; the bonds have 20 years to maturity. 200,000 zero coupon bonds with a price quote of 17.5 and 30 years until maturity.

Preferred stock: 125,000 shares of 4 percent preferred stock with a current price of $79, and a par value of $100.

Common stock: 2,300,000 shares of common stock; the current price is $65, and the beta of the stock is 1.20.

Market: The corporate tax rate is 40 percent, the market risk premium is 7 percent, and the risk-free rate is 4 percent.

Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...