Question

The charter company has the following financing outstanding. What is the WACC for the company?

Debt: 40,000 bonds with a 8% coupon rate and a current price quote of 1200 the bonds have 25 years to maturity. 150,000 zero coupon bonds with a price quote of 185 and 30 years to maturity.

Preferred Stock: 100,000 shares of 5% preferred stock with a current price of $78, and a par value of $100.

Common Stock: 1,800,000 shares of Common Stock; the current price is $75. And the beta of the stock is 1.2.

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

Please Solve As soon as
Solve quickly I get you two UPVOTE directly
Thank's
Abdul-Rahim Taysir

Answer 1

The par value is traditionally set at 100, which represents 100% of a bond's $1,000 face value

I

Cost of Debt----I

Assume Debt is irredeemable Debt

Interest after tax

4.80

(8*60%)

Quoted Price

120

Cost of Debt

4.00%

(4.8/120) X 100

II

Cost of Debt----II(Zero Coupon Bond)

Yield To Maturity=(Face Value/Current Bond Price)^(1/Years To Maturity)-1

Zero-coupon bonds do not have reoccurring interest payments, which distinguishes yield to maturity calculations from bonds with a coupon rate

Price of Bond

185

Current Bond Price

27,750,000

(150000*185)

Face Value,M

15,000,000

Yield to maturity

2%

(Apply above formula)

Cost of Debt

2%

III

Cost of Preferred Stock

5%

IV

Cost of equity,E(Ri)

E(Ri) = Rf + ßi * (risk premium)

Risk Free rate (Rf)

4%

Risk Premium

7%

Beta,ßi

1.20

Cost of equity,E(Ri)

12%

Calculation of WACC

ekkarill92 Next > < Previous Related Solutions The charter company has the following financing outstanding. What is the WACC for the company? Debt:... The charter company has the following financing outstanding. What is the WACC for the company? Debt: 40,000 bonds with a 8% coupon rate and a current price quote of 1200 the bonds have 25 years to maturity. 150,000 zero coupon bonds with a price quote of 185 and 30 years to maturity. Preferred Stock: 100,000 shares of 5% preferred stock with a current price of $78, and a par value of $100. Common Stock: 1,800,000 shares of Common Stock; the... The charter company has the following financing outstanding. What is the WACC for the company? Debt:... The charter company has the following financing outstanding. What is the WACC for the company? Debt: 40,000 bonds with a 8% coupon rate and a current price quote of 1200 the bonds have 25 years to maturity. 150,000 zero coupon bonds with a price quote of 185 and 30 years to maturity. Preferred Stock: 100,000 shares of 5% preferred stock with a current price of $78, and a par value of $100. Common Stock: 1,800,000 shares of Common Stock; the... The charter company has the following financing outstanding. What is the WACC for the company? Debt:... The charter company has the following financing outstanding. What is the WACC for the company? Debt: 40,000 bonds with a 8% coupon rate and a current price quote of 1200 the bonds have 25 years to maturity. 150,000 zero coupon bonds with a price quote of 185 and 30 years to maturity. Preferred Stock: 100,000 shares of 5% preferred stock with a current price of $78, and a par value of $100. Common Stock: 1,800,000 shares of Common Stock; the... The charter company has the following financing outstanding. What is the WACC for the company? Debt:... The charter company has the following financing outstanding. What is the WACC for the company? Debt: 40,000 bonds with a 8% coupon rate and a current price quote of 1200 the bonds have 25 years to maturity. 150,000 zero coupon bonds with a price quote of 185 and 30 years to maturity. Preferred Stock: 100,000 shares of 5% preferred stock with a current price of $78, and a par value of $100. Common Stock: 1,800,000 shares of Common Stock; the... The Saunders Investment Bank has the following financing outstanding. What is the WACC for the company?... The Saunders Investment Bank has the following financing outstanding. What is the WACC for the company? 1. Debt: 50,000 bonds with $1000 par value, a coupon rate of 4.7 percent, and a current price quote of 103.5 (103.5% of par value); the bonds have 20 years to maturity. 200,000 zero coupon bonds with $1000 par value, with a price quote of 17.5 and 30 years until maturity. 2. Preferred Stock: 125,000 shares of 4 percent preferred stock with a current... The Carrot Investment Bank has the following financing outstanding. What is the WACC for the company?... The Carrot Investment Bank has the following financing outstanding. What is the WACC for the company? Debt: 70,000 bonds with a coupon rate of 8 percent and a current price quote of 110.5; the bonds have 20 years to maturity. 300,000 zero coupon bonds with a price quote of 18.5 and 30 years until maturity. Preferred Stock: 200,000 shares of 5 percent preferred stock with a current price of $80, and a par value of $100 Common Stock: 3,000,000 shares... (WACC) A company has common stock, preferred shares, and debt outstanding. As of today, the common... (WACC) A company has common stock, preferred shares, and debt outstanding. As of today, the common stock is valued at $10 per share, with 2 million shares outstanding. It has a beta of 5, and market return is estimated to be 4% while treasury bills offer 1.5% risk-free rate. The preferred stock is valued at $15 per share, which pays dividend of $2 each year at a constant growth rate of 3%. Preferred stocks have 5 million shares outstanding. Finally,... (WACC) A company has common stock, preferred shares, and debt outstanding. As of today, the common... (WACC) A company has common stock, preferred shares, and debt outstanding. As of today, the common stock is valued at $10 per share, with 2 million shares outstanding. It has a beta of 5, and market return is estimated to be 4% while treasury bills offer 1.5% risk-free rate. The preferred stock is valued at $15 per share, which pays dividend of $2 each year at a constant growth rate of 3%. Preferred stocks have 5 million shares outstanding. Finally,... The Saunders Investment Bank has the following financing outstanding.      Debt: 58,000 bonds with a coupon... The Saunders Investment Bank has the following financing outstanding.      Debt: 58,000 bonds with a coupon rate of 5.4 percent and a current price quote of 106.7; the bonds have 13 years to maturity and a par value of $1,000. 18,500 zero coupon bonds with a price quote of 21.2, 29 years until maturity, and a par value of $10,000. Both bonds have semiannual compounding.   Preferred stock: 153,000 shares of 3.1 percent preferred stock with a current price of $86... The Saunders Investment Bank has the following financing outstanding.      Debt: 47,000 bonds with a coupon... The Saunders Investment Bank has the following financing outstanding.      Debt: 47,000 bonds with a coupon rate of 5.2 percent and a current price quote of 105.5; the bonds have 16 years to maturity and a par value of $1,000. 16,300 zero coupon bonds with a price quote of 25.3, 25 years until maturity, and a par value of $10,000. Both bonds have semiannual compounding.   Preferred stock: 142,000 shares of 3.7 percent preferred stock with a current price of $89... ADVERTISEMENT Subjects Accounting Advanced Math Anatomy and Physiology Biology Chemistry Civil Engineering Computer Science Economics Electrical Engineering Finance History Math Mechanical Engineering Operations Management Physics Psychology Statistics and Probability Nursing Other ADVERTISEMENT Latest Questions Journal Entries and Trial Balance Elite Realty acts as an agent in buying, selling, renting, and... In racket Assume that the elements of a list are indexed starting with 1. Write a... Describe System Development Life Cycle (SDLC) and how it is used. What symbolism do you find in the play,Oedipus? • Using the Scanner class to obtain input from the user. • Using printf to output... In each of the following situations, develop a tentative plan for the client. List the various... MARGI sells different types of wine. Customers place orders to the most popular “Summer Wine” at... ADVERTISEMENT About @ 2020 WizEdu