Assume it is January 1, 2021. Zelus Sport Shoe Company has three debt issues outstanding.
6.5% Notes December 31, 2029 ($200 million face value) Market price $980.05.
7.0% Bonds, maturing December 31, 2031 ($100 million face value) Market price $984.98.
7.5% Bonds, maturing December 31, 2037 ($200 million face value) Market price $1,029.15.
All bonds have a $1,000 face value and pay interest semi-annually.
Use a 4.0% risk-free rate and a 7.0% market risk premium to compute Zelus’s
The company also has 8 million shares of preferred stock outstanding. The preferred stock pays an annual $4.00 dividend and current sells for $50 per share. The tax rate is 30%.
Assume you are doing the WACC calculation on January 1, 2020, and that the semi-annual interest payments of the notes and bonds were paid on December 31, 2019. Show your beta and the costs and weights of all of the WACC components in the table provided. Show costs to 3 decimal places.
|
Date |
Zelus |
SP500 |
|
12/4/20 |
99.75 |
2066.50 |
|
11/27/20 |
101.25 |
2067.50 |
|
11/20/20 |
97.80 |
2063.50 |
|
11/13/20 |
102.50 |
2039.80 |
|
11/6/20 |
102.25 |
2031.95 |
|
10/30/20 |
98.50 |
2018.00 |
|
10/23/20 |
88.00 |
1964.65 |
|
10/16/20 |
87.00 |
1886.75 |
|
10/9/20 |
90.50 |
1906.10 |
|
10/2/20 |
89.75 |
1967.90 |
|
9/25/20 |
93.25 |
1982.85 |
|
9/18/20 |
89.00 |
2010.50 |
|
9/11/20 |
82.50 |
1985.50 |
|
9/4/20 |
85.00 |
2007.70 |
Beta (3 decimal places) = __________
|
Source of Capital |
Amount |
Before-tax Costs |
After-tax Cost |
Weight |
Weighted Cost |
|
6.5% Notes |
|
|
|
|
|
|
7.0% Bonds |
|
|
|
|
|
|
7.5% Bonds |
|
|
|
|
|
|
Preferred Stock |
|
|
|
|
|
|
Common Stock |
|
|
|
|
|
|
TOTAL |
|
- |
- |
WACC |
|
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