Wal-Mart plans to open a new store near Campus. Wal-Mart is going to finance via bond market and stock market. Total capital required is 10 million dollars. 3 million dollars are going to be financed via stock market and the rest will be from the bond market (so We=0.3) . Wal-Mart’s beta is 0.70. Three month Treasury Bill rate is 2% (risk free rate) and the S&P500 index return is 8% (market return). The 3% annual coupon bond is traded in the market for $950 and is going to be matured in 10 years. Flotation fee is 7% of the price of the bond. Tax rate is 40%. How much is the WACC? 51% 08% 11% 05%
Wal-Mart plans to open a new store near Campus. Wal-Mart is going to finance via bond market and stock market. Total capital required is 10 million dollars. 3 million dollars are going to be financed via stock market and the rest will be from the bond market (so We=0.3) . Wal-Mart’s beta is 0.70. Three month Treasury Bill rate is 2% (risk free rate) and the S&P500 index return is 8% (market return). The 3% annual coupon bond is traded in the market for $950 and is going to be matured in 10 years. Flotation fee is 7% of the price of the bond. Tax rate is 40%. How much is the WACC? 51% 08% 11% 05%
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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- Wal-Mart plans to open a new store near Campus. Wal-Mart is going to finance via bond market and stock market. Total capital required is 10 million dollars. 3 million dollars are going to be financed via stock market and the rest will be from the bond market (so We=0.3) . Wal-Mart’s beta is 0.70. Three month Treasury Bill rate is 2% (risk free rate) and the S&P500 index return is 8% (market return). The 3% annual coupon bond is traded in the market for $950 and is going to be matured in 10 years. Flotation fee is 7% of the price of the bond. Tax rate is 40%. How much is the WACC?
- 51%
- 08%
- 11%
- 05%
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