The Saunders Investment Bank has the following financing outstanding. Debt: Preferred stock: Common stock: Market: 55,000 bonds with a coupon rate of 5.1 percent and a current price quote of 107.1; the bonds have 10 years to maturity and a par value of $1,000. 17,900 zero coupon bonds with a price quote of 29.3, 27 years until maturity, and a par value of $10,000. Both bonds have semiannual compounding. 150,000 shares of 3.4 percent preferred stock with a current price of $89 and a par value of $100. 2,200,000 shares of common stock; the current price is $87 and the beta of the stock is 1.15. The corporate tax rate is 25 percent, the market risk premium is 7.1 percent, and the risk-free rate is 3.5 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 Saunders Investment Bank has the following financing outstanding. Debt: Preferred stock: Common stock: Market: 55,000 bonds with a coupon rate of 5.1 percent and a current price quote of 107.1; the bonds have 10 years to maturity and a par value of $1,000. 17,900 zero coupon bonds with a price quote of 29.3, 27 years until maturity, and a par value of $10,000. Both bonds have semiannual compounding. 150,000 shares of 3.4 percent preferred stock with a current price of $89 and a par value of $100. 2,200,000 shares of common stock; the current price is $87 and the beta of the stock is 1.15. The corporate tax rate is 25 percent, the market risk premium is 7.1 percent, and the risk-free rate is 3.5 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 Saunders Investment Bank has the following financing outstanding.
Debt:
Preferred
stock:
Common
stock:
Market:
55,000 bonds with a coupon rate of 5.1 percent and a current price
quote of 107.1; the bonds have 10 years to maturity and a par value of
$1,000. 17,900 zero coupon bonds with a price quote of 29.3, 27 years
until maturity, and a par value of $10,000. Both bonds have semiannual
compounding.
150,000 shares of 3.4 percent preferred stock with a current price of
$89 and a par value of $100.
2,200,000 shares of common stock; the current price is $87 and the
beta of the stock is 1.15.
The corporate tax rate is 25 percent, the market risk premium is 7.1
percent, and the risk-free rate is 3.5 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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