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Category > Accounting Posted 14 Jun 2017 My Price 3.00

The Saunders Investment Bank has the following financing outstanding

The Saunders Investment Bank has the following financing outstanding.

  

  Debt:

20,000 bonds with a coupon rate of 10 percent and a current price quote of 108.0; the bonds have 20 years to maturity. 190,000 zero coupon bonds with a price quote of 19.5 and 30 years until maturity.
   
  Preferred stock:

110,000 shares of 8 percent preferred stock with a current price of $83, and a par value of $100.
   
  Common stock:

2,200,000 shares of common stock; the current price is $69, and the beta of the stock is 1.35.
   
  Market:

The corporate tax rate is 40 percent, the market risk premium is 7 percent, and the risk-free rate is 4 percent.

  

What is the WACC for the company? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

  

  WACC %

Answers

Alpha Geek
(8)
Status NEW Posted 14 Jun 2017 08:06 AM My Price 3.00

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file 1497427486-Answer.docx preview (39 words )
S-----------olu-----------tio-----------n -----------Cos-----------t o-----------f d-----------ebt-----------: Y-----------TM -----------for----------- co-----------upo-----------n p-----------ayi-----------ng -----------bon-----------d =----------- R-----------ATE-----------(20-----------,10-----------,-1-----------08,-----------100-----------) =----------- 9.-----------12%----------- -----------Aft-----------er -----------tax----------- co-----------st -----------= 9-----------.12-----------% *----------- (1----------- - -----------.40-----------) =----------- 5.-----------47%----------- -----------Zer-----------o c-----------oup-----------on -----------bon-----------d =----------- R-----------ATE-----------(30-----------,0,------------19-----------.5,-----------100-----------) =----------- 5.-----------60%----------- -----------Aft-----------er -----------tax----------- co-----------st -----------= 5-----------.60-----------% *----------- (1----------- - -----------.40-----------) =----------- 3 ----------- -----------
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