CSNY Corporation has the 13,000 6.4 percent coupon bonds outstanding, with 15 years to maturity and is presently selling at 107% of par value. The bonds pay interest semiannually. CSNY also has 345,000 shares of common stock selling for $76.50 per share. The stock has a beta of 0.9 and will pay a dividend of $3.80 next year. The dividend is expected to grow by 5% per year indefinitely. In addition, CSNT has 10,000 shares of 4.4% preferred stock selling at $86 per share. The market is expected to return 11% and Treasury Bills are expected to return 3.6%. CSNY’s tax rate is 22%. Calculate the firm’s Weighted Average Cost of Capital. (WACC).
CSNY Corporation has the 13,000 6.4 percent coupon bonds outstanding, with 15 years to maturity and is presently selling at 107% of par value. The bonds pay interest semiannually. CSNY also has 345,000 shares of common stock selling for $76.50 per share. The stock has a beta of 0.9 and will pay a dividend of $3.80 next year. The dividend is expected to grow by 5% per year indefinitely. In addition, CSNT has 10,000 shares of 4.4% preferred stock selling at $86 per share. The market is expected to return 11% and Treasury Bills are expected to return 3.6%. CSNY’s tax rate is 22%. Calculate the firm’s Weighted Average Cost of Capital. (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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Debenture Valuation
A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.
Note Valuation
It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:
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- CSNY Corporation has the 13,000 6.4 percent coupon bonds outstanding, with 15 years to maturity and is presently selling at 107% of par value. The bonds pay interest semiannually. CSNY also has 345,000 shares of common stock selling for $76.50 per share. The stock has a beta of 0.9 and will pay a dividend of $3.80 next year. The dividend is expected to grow by 5% per year indefinitely. In addition, CSNT has 10,000 shares of 4.4%
preferred stock selling at $86 per share. The market is expected to return 11% and Treasury Bills are expected to return 3.6%. CSNY’s tax rate is 22%. Calculate the firm’s Weighted Average Cost of Capital. (WACC).
- CSNY Corporation has the 13,000 6.4 percent coupon bonds outstanding, with 15 years to maturity and is presently selling at 107% of par value. The bonds pay interest semiannually. CSNY also has 345,000 shares of common stock selling for $76.50 per share. The stock has a beta of 0.9 and will pay a dividend of $3.80 next year. The dividend is expected to grow by 5% per year indefinitely. In addition, CSNT has 10,000 shares of 4.4%
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