The Saunders Investment Bank has the following financing
outstanding.
Debt: | 20,000 bonds with a coupon rate of 12 percent and a current price quote of 110; the bonds have 20 years to maturity. 190,000 zero coupon bonds with a price quote of 20.5 and 30 years until maturity. Both bonds have a par value of $1,000. Assume semiannual compounding. |
Preferred stock: | 110,000 shares of 10 percent preferred stock with a current price of $85, and a par value of $100. |
Common stock: | 2,200,000 shares of common stock; the current price is $71, and the beta of the stock is 1.45. |
Market: | The corporate tax rate is 30 percent, the market risk premium is 5 percent, and the risk-free rate is 2 percent. |
What is the WACC for the company? (Do not round
intermediate calculations. Enter your answer as a percent rounded
to 2 decimal places, e.g., 32.16.)
WACC
%
=(20000*1000*110%*RATE(20*2,-12%*1000/2,110%*1000,-1000)*2*(1-30%)+190000*1000*20.5%*RATE(30*2,0,-20.5%*1000,1000)*2*(1-30%)+110000*85*(10%*100/85)+2200000*71*(2%+1.45*5%))/(20000*1000*110%+190000*1000*20.5%+110000*85+2200000*71)
=8.24%
The Saunders Investment Bank has the following financing outstanding. Debt: 20,000 bonds with a coupon rate...
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