The IPO Investment Bank has the following financing outstanding. What is the WACC for the company? Debt:
Question:
The IPO Investment Bank has the following financing outstanding. What is the WACC for the company?
Debt: 80,000 bonds with a coupon rate of 5.8 percent and a current price quote of 106.4; the bonds have 20 years to maturity. 230,000 zero coupon bonds with a price quote of 14.3 and 30 years until maturity. Both bonds have a par value of $1,000 and semiannual coupons.
Preferred stock: 150,000 shares of 3.8 percent preferred stock with a current price of $81 and a par value of $100.
Common stock: 2,300,000 shares of common stock; the current price is $68, and the beta of the stock is 1.09.
Market: The corporate tax rate is 23 percent, the market risk premium is 7 percent, and the risk-free rate is 3.2 percent.
Step by Step Answer:
Corporate Finance Core Principles And Applications
ISBN: 9781260571127
6th Edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan