17. Preferred Stock and WACC The Saunders Investment Bank has the following financing outstanding. What is the WACC for the company? Debt: 40,000 bonds with a coupon rate of 4.9 percent and a current price quote of 106.5; the bonds have 15 years to maturity and a par value of $1,000. 40,000 zero coupon bonds with a price quote of 21.8, 30 years until maturity, and a par value of $10,000. Both bonds have semiannual compunding. 135,000 shares of 3.5 percent preferred stock with a current price of $87 and a par value of $100. 1,900,000 shares of common stock; the current price is $73 and the beta of the stock is 1.15. The corporate tax rate is 23 percent, the market risk premium is 7 percent, and the risk-free rate is 3.6 percent. Preferred stock: Common stock: Market:
17. Preferred Stock and WACC The Saunders Investment Bank has the following financing outstanding. What is the WACC for the company? Debt: 40,000 bonds with a coupon rate of 4.9 percent and a current price quote of 106.5; the bonds have 15 years to maturity and a par value of $1,000. 40,000 zero coupon bonds with a price quote of 21.8, 30 years until maturity, and a par value of $10,000. Both bonds have semiannual compunding. 135,000 shares of 3.5 percent preferred stock with a current price of $87 and a par value of $100. 1,900,000 shares of common stock; the current price is $73 and the beta of the stock is 1.15. The corporate tax rate is 23 percent, the market risk premium is 7 percent, and the risk-free rate is 3.6 percent. Preferred stock: Common stock: Market:
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
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Transcribed Image Text:17. Preferred Stock and WACC The Saunders Investment Bank has the following financing outstanding. What is the WACC for the
company?
Debt:
40,000 bonds with a coupon rate of 4.9 percent and a current price quote of 106.5; the bonds have 15 years to
maturity and a par value of $1,000. 40,000 zero coupon bonds with a price quote of 21.8, 30 years until maturity,
and a par value of $10,000. Both bonds have semiannual compunding.
135,000 shares of 3.5 percent preferred stock with a current price of $87 and a par value of $100.
1,900,000 shares of common stock; the current price is $73 and the beta of the stock is 1.15.
The corporate tax rate is 23 percent, the market risk premium is 7 percent, and the risk-free rate is 3.6 percent.
Preferred stock:
Common stock:
Market:
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