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A company currently have semi-annual $1,000 face value bonds outstanding with 20 years left until maturity...

A company currently have semi-annual $1,000 face value bonds outstanding with 20 years left until maturity that pay 6-percent annual coupons. The bonds are currently trading at a discount of 96 percent of the par value, and there are 1,500 bonds outstanding. The company also have 50,000 preferred shares outstanding providing a $2 annual dividend with a $25 per share par value and currently trading at $23.50 per share. The company has a beta of 1.18, and present market conditions are such that the risk-free rate is 3 percent, while the market risk premium is 7 percent. The firm’s common shares trade for $30 per share, and there are currently 100,000 shares outstanding. The firm’s tax rate is 30 percent.

  1. Determine the firm’s cost of long-term debt, preferred shares, and common equity financing under the conditions above.
  2. Determine the current value of the company using market values.

C. Determine the WACC of the company.

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jeff jeffy answered 2 years ago
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