The IPO Investment Bank has the following financing outstanding. Debt: 50,000 bonds with a coupon rate of 7 percent and a current price quote of 110; the bonds have 20 years to maturity. 220,000 zero coupon bonds with a price quote of 18 and 30 years until maturity. Both bonds have a par value of $1,000 and semiannual coupons. Preferred stock: 140,000 shares of 5 percent preferred stock with a current price of $80, and a par value of $100. Common stock: 2,500,000 shares of common stock; the current price is $66, and the beta of the stock is 1.2. Market: The corporate tax rate is 21 percent, the market risk premium is 6 percent, and the risk-free rate is 3 percent. What is the WACC for the company? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) WACC %
The IPO Investment Bank has the following financing outstanding. Debt: 50,000 bonds with a coupon rate of 7 percent and a current price quote of 110; the bonds have 20 years to maturity. 220,000 zero coupon bonds with a price quote of 18 and 30 years until maturity. Both bonds have a par value of $1,000 and semiannual coupons. Preferred stock: 140,000 shares of 5 percent preferred stock with a current price of $80, and a par value of $100. Common stock: 2,500,000 shares of common stock; the current price is $66, and the beta of the stock is 1.2. Market: The corporate tax rate is 21 percent, the market risk premium is 6 percent, and the risk-free rate is 3 percent. What is the WACC for the company? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) 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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Transcribed Image Text:The IPO Investment Bank has the following financing outstanding.
Debt:
50,000 bonds with a coupon rate of 7 percent and a current price quote of
110; the bonds have 20 years to maturity. 220,000 zero coupon bonds with a
price quote of 18 and 30 years until maturity. Both bonds have a par value of
$1,000 and semiannual coupons.
Preferred stock: 140,000 shares of 5 percent preferred stock with a current price of $80, and
a par value of $100.
Common stock: 2,500,000 shares of common stock; the current price is $66, and the beta of
the stock is 1.2.
Market:
The corporate tax rate is 21 percent, the market risk premium is 6 percent,
and the risk-free rate is 3 percent.
What is the WACC for the company? (Do not round intermediate calculations and enter
your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
WACC
%
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