• (20 points) Use the information below and market values to find this companys WACC.

• The risk-free rate is 4%. The expected return on the market is 12.5%.
• The companys beta is 1.8.
• The company has three different bond issues outstanding:
  • Bond 1 is a zero-coupon bond with YTM of 7%, face value of $1,000, and it matures in 8 years. There are 50,000 of these bonds outstanding.
  • Bond 2 is a 5% coupon bond with YTM of 3.5%, face value of $1,000, and it matures in 12 years. There are 75,000 of these bonds outstanding.
  • Bond 3 is a an unconventional bond that pays no coupon for the next four years, then pays a 10% coupon for the remaining 3 years of its lifetime. Face value is $1,000. The YTM on these bonds is 9%. There are 100,000 of these bonds outstanding.
• The companys current stock price is $42. There are 6,000,000 shares of stock outstanding.
• The companys average tax rate is 30%.