ZuoTi.Pro
Question

A corporation has 10,000 bonds outstanding with a 6% annual coupon rate and 8 years to...

A corporation has 10,000 bonds outstanding with a 6% annual coupon rate and 8 years to maturity. Each bond has a $1,000 face value and a $1,100 market price. • The company’s 1,250,000 shares of common stock sell for $10 per share. • The company will pay $1.2/share in dividend next period, the steady growth of dividend 4%/period is expected to last infinitely. • Tax rate is 40%. 1. What is the company’s cost of debt? 2. What is the company’s cost of equity? 3. What is the company’s weight of debt and equity? 4. What is the company’s WACC?

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

PAGE No. DATE: 드Glo00x62.).(1-0.go) + Φ1a00-Sllao 2 t 19.50 2.23% (Approx) _ 1050 os Priu468 ●0-5319 on 53-19% 9:55 %ommen

2 0
Add a comment
Know the answer?
Add Answer to:
A corporation has 10,000 bonds outstanding with a 6% annual coupon rate and 8 years to...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • Teddy Corp. has 10,000 bonds outstanding with a 6% annual coupon rate, 8 years to maturity,...

    Teddy Corp. has 10,000 bonds outstanding with a 6% annual coupon rate, 8 years to maturity, a 1,000 face value, and a 1,100 market price. b) Teddy Corp. 100,000 shares of preferred stock pay an annual dividend of 3, and currently sell for 30 per share. c) Teddy Corp. 500,000 shares of common stock currently sell for 25 per share. The stock has a beta of 1.5. The risk free rate is 4%, and the market return is 12%. Assuming...

  • Debt: 500 4% coupon bonds outstanding, with a par value of $1,000, 10 years to maturity,...

    Debt: 500 4% coupon bonds outstanding, with a par value of $1,000, 10 years to maturity, trading at $950 and making semi-annual payments. Equity: 20,000 shares outstanding and trading at a price of $40 per share. The current dividend is $1 per share and the expected earnings growth rate is 5%. A) What is the WACC?  Assume a tax rate of 30%

  • of preferred stock outstanding carrying a $9.00 per share annual dividend, and 220,000 10% coupon bonds...

    of preferred stock outstanding carrying a $9.00 per share annual dividend, and 220,000 10% coupon bonds outstanding, par value $1,000 each, interest paid semiannually. The common stock currently sells for $42 per share and has a beta of 1.15, the preferred stock currently sells for $80 per share, and the bonds have 17 years to maturity and sell for 91 percent of par. The market risk premium is 11.5 percent, T-bills are yielding 7.5 percent, and the firm's tax rate...

  • WACC

    4. A corporation has 10,000 bonds outstanding with a 4% annual coupon rate, ten years to maturity, a $1,000 face value, and a $1,100 market price. The company’s 100,000 preference shares pay a $2 annual dividend and sell for $20 per share. The company’s 500,000 ordinary shares sell for $35 per share and have a beta of 1.5. The risk-free rate is 3%, and the market return is 8%. Finally, the tax rate is 20%. what is the WACC?

  • Titan Mining Corporation has 8.5 million shares of common stock outstanding and 200,000 8% coupon long...

    Titan Mining Corporation has 8.5 million shares of common stock outstanding and 200,000 8% coupon long term bonds outstanding, par value $1,000 each. The common stock currently trading at $34 per share and the bond is now selling at par value. The company is expected to pay a dividend of $2.516 next year and the dividend growth rate is 6%. Titan Mining's tax rate is 35% a. What is the required rate of return of Titan's share? b. What is...

  • Hilton Corporation has 1 million shares of common stock outstanding and 175,000 bonds with 6% coupon...

    Hilton Corporation has 1 million shares of common stock outstanding and 175,000 bonds with 6% coupon at $1000 par each. The stock currently sells at $53 per share and has a beta of 1.15; the bonds have 25 years to maturity and sell at $1141. The market risk premium is 6.8% and Treasury bills are yielding 3.1%. If Hilton’s corporate tax rate is 21%, what is the company’s cost of capital (WACC)?

  • Use the following information for questions 1-7. A corporation has 9,000,000 shares of stock outstanding at...

    Use the following information for questions 1-7. A corporation has 9,000,000 shares of stock outstanding at a price of $40 per share. Net Income is $28,000,000 and they just paid a dividend of $2 and the dividend is expected to grow by 5% per year forever (Therefore next year’s dividend will be 2*(1.05) = $2.10). The stock has a beta of .9, the current risk free rate is 4%, and the market risk premium is 6%. The corporation also has...

  • Use the following information for questions 1-7. A corporation has 9,000,000 shares of stock outstanding at...

    Use the following information for questions 1-7. A corporation has 9,000,000 shares of stock outstanding at a price of $40 per share. Net Income is $28,000,000 and they just paid a dividend of $2 and the dividend is expected to grow by 5% per year forever (Therefore next year’s dividend will be 2*(1.05) = $2.10). The stock has a beta of .9, the current risk free rate is 4%, and the market risk premium is 6%. The corporation also has...

  • 7. Paccione Corporation has a bond issue outstanding with 9 years to maturity, a coupon rate...

    7. Paccione Corporation has a bond issue outstanding with 9 years to maturity, a coupon rate of 7.5 percent, and a $1,000 face value. The bonds pay coupons semi-annually. The bonds sell for $1,140. What is the yield to maturity on the bonds?

  • A firm has the following capital structure. Assume the company's tax rate is 25% Debt: the firm has 5,000 6% coupon bonds outstanding $1000 par value, 11 years to maturity selling for 103 percent...

    A firm has the following capital structure. Assume the company's tax rate is 25% Debt: the firm has 5,000 6% coupon bonds outstanding $1000 par value, 11 years to maturity selling for 103 percent of par: the bonds make semiannual payments. Common Stock: The firm has 375000 shares outstanding, selling for $65 per share; the beta is 1.08 Preferred Stock: The firm has 15,000 shares of 5% preferred stock outstanding, currently selling for $75 per share. There is currently a...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT