Equity Information: -50 million shares -$80 per share -Beta = 1.15 -Market risk premium = 9% -Risk-free rate = 5% Debt Information: -$1 billion in outstanding debt (face value) -Current price = $1100 -Coupon rate = 9%, semiannual coupons -15 years to maturity - Tax rate = 40% What is the WACC? a. 11.60% approximately O b. 21.57% approximately C. 13.73% approximately. O d. 13.06% approximately e. 10.03% approximately Gordon Growth Company is expected to pay a dividend of $4 next period and dividends are expected to grow at 6% per year. The required return is 16%. What is the expected stock price in year 4? O a. $5.50 O b. No option is correct ○ c. $50.05 O d. $5.05 O e. $55 What is the current yield on a 10% coupon bond which is currently selling for $1,150? O a. 9.4% O b. 7.8% O c. 8.7% ○ d. 10% O e. 80.7%

Equity Information: -50 million shares -$80 per share -Beta = 1.15 -Market risk premium = 9% -Risk-free rate = 5% Debt Information: -$1 billion in outstanding debt (face value) -Current price = $1100 -Coupon rate = 9%, semiannual coupons -15 years to maturity - Tax rate = 40% What is the WACC? a. 11.60% approximately O b. 21.57% approximately C. 13.73% approximately. O d. 13.06% approximately e. 10.03% approximately Gordon Growth Company is expected to pay a dividend of $4 next period and dividends are expected to grow at 6% per year. The required return is 16%. What is the expected stock price in year 4? O a. $5.50 O b. No option is correct ○ c. $50.05 O d. $5.05 O e. $55 What is the current yield on a 10% coupon bond which is currently selling for $1,150? O a. 9.4% O b. 7.8% O c. 8.7% ○ d. 10% O e. 80.7%

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter11: Determining The Cost Of Capital

Section: Chapter Questions

Problem 9P: Bond Yield and After-Tax Cost of Debt A companys 6% coupon rate, semiannual payment, 1,000 par value...

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