The IPO Investment Bank has the following financing outstanding. Debt: 20,000 bonds with a coupon rate of 12 percent and a current price quote of 110; the bonds have 20 years to maturity. 190, 000 zerocoupon bonds with a price quote of 20.5 and 30 years until maturity. Both bonds have a par value of $1,000 and semiannual coupons. Preferred stock: 110,000 shares of 10 percent preferred stock with acurrent price of $85, and a par value of $100. Common stock: 2,200, 000 shares of common stock; the current price is $71, and the beta of the stock is 1.45. Market: The corporate tax rate is 21 percent, themarket risk premium is 5 percent, and the risk - free rate is 2 percent. What is the WACC for the company? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimalplaces, e.g., 32.16.)

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Answered: The IPO Investment Bank has the…

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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Similar questions

Adventureland Corporation offers 5 percent coupon bonds with semiannual payments and a yield to maturity of 5 percent. The bonds mature in 10 years. What is the market price per bond if the face value is $1,000? O $318.75 O $631.25 O $1000.00 O $1611.25 O $1377.68
AEP issued 20-year 7.4% annual coupon bonds at their par value of $1,000 one year ago. Today, the market interest rate on these bonds is 5.5%. What is the price of the bonds today? $1,196.13 $1,220.55 $1,281.57 $1,000.85 $1,013.05
Tweet Ltd recently issued non-callable bonds that mature in 10 years. They have a par value of $1,000 and an annual coupon of 6%. If the current market interest rate is 8.0%, at what price should the bonds sell? Select one: a. $897.21 b. $855.26 c. $865.79 d. $831.14
Harnett Computing has 10-year, non-callable, 9.0% semi-annual coupon bonds outstanding. The bonds have a par value of $1,000 and a nominal YTM of 9.42%. What is the bonds' current market price? $937.69 $961.38 $1,038.62 $950.33 $973.17
Five years ago Tosev Inc. issued 30-year, $1,000 par value, semi-annual coupon bonds with a coupon rate of 9.10 percent. The bonds originally sold at a price of $1,010.32 per bond. Currently, those bonds have a market price of $1,118.15 per bond. The Chief Financial Officer of Tosev is currently considering issuing new bonds. These bonds will have a par value of $1,000, semi-annual coupon payments, a term of 25 years and a coupon rate of 8 percent. Due to differences in the legal provisions of the bonds, the Chief Financial Officer estimates that the yield to maturity on the new bonds will be one percent higher than the current yield to maturity on the old bonds. Based on the Chief Financial Officer's estimate, what would be the price per bond of the new bonds today? $1,000.00 $896.67 None of the answers in this list is within $0.25 of the correct answer. $1,118.15 $817.44 $901.19 10 fs % f6 hp f7 8
Monster Inc. issues $100,000 face value, 6% semiannual coupon bonds maturing in 10 years. The market initially prices these bonds to yield 8% compounded semiannually. What is the issue price of these bonds? Select one: a. $81,902 b. $78,066 c. $87,506 d. $108,784 e. $86,410
Exodus Limousine Company has $1,000 par value bonds outstanding at 12 percent interest. The bonds will mature in 30 years with annual payments. Use Appendix B and Appendix D. Compute the current price of the bonds if the current yield to maturity is:(Round "PV Factor" to 3 decimal places. Do not round intermediate calculations. Round the final answers to 2 decimal places.) Price of thebond a. 7 percent $ b. 17 percent $
A corporation issues 25-year $1,000 zero-coupon bonds. Calculate the price you must pay for one of these bonds based on a prevailing 12.5% annual rate.
On January 2, Year 3, JRCorp purchases a 5-year $100,000 face value, 4 percent fixed coupon bond paying annual interest when market rates at issuance for comparable bonds are 5 percent. The bond cost $95,671 at purchase and one year later, the market price was $94,742. Market rates most likely: Decreased by 0.5 percent. Increased by 0.5 percent. OC. Increased by 5.5 percent. O D. Decreased by 5.5 percent. A. OB. What is the calculations to derived at an increase of 5% for market rates.
Matthews Technology has a $1,000 par value, 20 year convertible bond outstanding with a 10% coupon rate that can be converted into 25 shares of common stock. The common stock is currently selling for $34.00 a share. The convertible bond is selling for $30 more than the conversion value. A competitive, 20 year nonconvertible bond of the same risk class has a 12% annual coupon rate. What is the number of common shares to which the convertible bond can be converted to (Conversion ratio)? Round to the nearest share. Compute the conversion price? Round to 2 decimal places. Compute the conversion value? Round to 2 decimal places. Compute the conversion premium? Round to 2 decimal places. Compute the current selling price of the convertible bond? Round to 2 decimal places. Compute the pure bond value? Round to 2 decimal places. If the common share price goes down to $31.50 and the conversion premium goes up…
5. A securities firm has provided the balance sheet below. Assets ($ millions) $ 34 Liabilities and Equity ($ millions) Short-term funding Cash $ 27 Debt securities 175 Bonds 300 Equity securities 400 Debentures 197 Other assets 12 Equity 97 Total Assets $ 621 Total Liabilities and Equity $ 621 The debt securities have an annual 7.25% coupon rate, 22 years to maturity and a yield to maturity of 6.75%. The market value of the equity securities and the other assets is equal to their book value. The firm has 500,000 shares outstanding and the price per share is $35.67. a. Calculate the firm's aggregate indebtedness to net capital ratio. b. Calculate the firm's highly liquid assets to total liabilities ratio. Based on the firm's ratios from a and b, is it in compliance with Rule 15C 3-1? Why or why not? C.
Vogril Company issued 20-year, zero coupon bonds with an expected yield to maturity of 9 percent. The bonds have a par value of $1,000 and were sold for $178.43 each. What is the expected interest expense on these bonds for Year 8? Group of answer choices $90.00 $29.35 $25.79 $32.00 $26.12

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