1. Information on Zero Co., is shown below. Assume the company's tax rate is 23 percent. • Debt: 16,800 5.9 percent coupon bonds outstanding, $1,000 par value, 25 years to maturity, selling for 106.4 percent of par; the bonds make semiannual payments. • Common stock: 550,000 shares outstanding, selling for $81.75 per share; beta is 1.15. • Preferred stock: 21,500 shares of 4.15 percent preferred stock outstanding, currently selling for $91.30 per share. The par value is $100. • Market: 6.4 percent market risk premium and 2.9 percent risk-free rate. What is the company's WACC? 2. One-One Corporation has 6.4 million shares of common stock outstanding, 320,000 shares of 4.65 percent preferred stock outstanding, par value of $100, and 73,000 5.6 percent semiannual bonds outstanding, par value $2,000 each. The common stock currently sells for $74.25 per share and has a beta of 1.14, the preferred stock currently sells for $101.60 per share, and the bonds have 23 years to maturity and sell for 96.1 percent of par. The market risk premium is 6.8 percent, T-bills are yielding 3.4 percent, and the firm's tax rate is 25 percent. What is the company's WACC? 3. Please see below for Two-Two Corporation's information. Debt: 9,700 7.2 percent coupon bonds outstanding, with 23 years to maturity and a quoted price of 105.75. These bonds have a par value of $1,000 and pay interest semiannually. • Common stock: 260,000 shares of common stock selling for $65.20 per share. The stock has a beta of .97 and will pay a dividend of $3.40 next year. The dividend is expected to grow by 5.2 percent per year indefinitely. Preferred stock: 8,700 shares of 4.60 percent preferred stock selling at $94.70 per share. Market: 11.3 percent expected return, a risk-free rate of 3.95 percent, and a 22 percent tax rate. What is the company's WACC?
1. Information on Zero Co., is shown below. Assume the company's tax rate is 23 percent. • Debt: 16,800 5.9 percent coupon bonds outstanding, $1,000 par value, 25 years to maturity, selling for 106.4 percent of par; the bonds make semiannual payments. • Common stock: 550,000 shares outstanding, selling for $81.75 per share; beta is 1.15. • Preferred stock: 21,500 shares of 4.15 percent preferred stock outstanding, currently selling for $91.30 per share. The par value is $100. • Market: 6.4 percent market risk premium and 2.9 percent risk-free rate. What is the company's WACC? 2. One-One Corporation has 6.4 million shares of common stock outstanding, 320,000 shares of 4.65 percent preferred stock outstanding, par value of $100, and 73,000 5.6 percent semiannual bonds outstanding, par value $2,000 each. The common stock currently sells for $74.25 per share and has a beta of 1.14, the preferred stock currently sells for $101.60 per share, and the bonds have 23 years to maturity and sell for 96.1 percent of par. The market risk premium is 6.8 percent, T-bills are yielding 3.4 percent, and the firm's tax rate is 25 percent. What is the company's WACC? 3. Please see below for Two-Two Corporation's information. Debt: 9,700 7.2 percent coupon bonds outstanding, with 23 years to maturity and a quoted price of 105.75. These bonds have a par value of $1,000 and pay interest semiannually. • Common stock: 260,000 shares of common stock selling for $65.20 per share. The stock has a beta of .97 and will pay a dividend of $3.40 next year. The dividend is expected to grow by 5.2 percent per year indefinitely. Preferred stock: 8,700 shares of 4.60 percent preferred stock selling at $94.70 per share. Market: 11.3 percent expected return, a risk-free rate of 3.95 percent, and a 22 percent tax rate. What is the company's WACC?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:1. Information on Zero Co., is shown below. Assume the company's tax rate is 23 percent.
• Debt: 16,800 5.9 percent coupon bonds outstanding, $1,000 par value, 25 years to maturity, selling for 106.4 percent of par; the bonds make
semiannual payments.
• Common stock:
550,000 shares outstanding, selling for $81.75 per share; beta is 1.15.
• Preferred stock: 21,500 shares of 4.15 percent preferred stock outstanding, currently selling for $91.30 per share. The par value is $100.
• Market: 6.4 percent market risk premium and 2.9 percent risk-free rate.
What is the company's WACC?
2. One-One Corporation has 6.4 million shares of common stock outstanding, 320,000 shares of 4.65 percent preferred stock outstanding, par value
of $100, and 73,000 5.6 percent semiannual bonds outstanding, par value $2,000 each. The common stock currently sells for $74.25 per share and
has a beta of 1.14, the preferred stock currently sells for $101.60 per share, and the bonds have 23 years to maturity and sell for 96.1 percent of par.
The market risk premium is 6.8 percent, T-bills are yielding 3.4 percent, and the firm's tax rate is 25 percent.
What is the company's WACC?
3. Please see below for Two-Two Corporation's information.
Debt: 9,700 7.2 percent coupon bonds outstanding, with 23 years to maturity and a quoted price of 105.75. These bonds have a par value of
$1,000 and pay interest semiannually.
• Common stock: 260,000 shares of common stock selling for $65.20 per share. The stock has a beta of .97 and will pay a dividend of $3.40 next
year. The dividend is expected to grow by 5.2 percent per year indefinitely.
Preferred stock: 8,700 shares of 4.60 percent preferred stock selling at $94.70 per share.
Market: 11.3 percent expected return, a risk-free rate of 3.95 percent, and a 22 percent tax rate.
What is the company's WACC?
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