3. Debt: Calculate cost of debt, cost of equity and WACC. Common stock: Market: 3,000 bonds...

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3. Debt: Calculate cost of debt, cost of equity and WACC. Common stock: Market: 3,000 bonds outstanding (8% coupon rate, $1,000 par value, 6 years to maturity, selling for 102 percent of par; the bonds make semi-annual payments) 75,000 shares outstanding selling for $50 per share; the beta is .85 10 percent market risk premium and 5 percent risk-free rate. Tax rate is 35%. (Hint: YTM (or ki) must be the interest rate per year.) 3. Debt: Calculate cost of debt, cost of equity and WACC. Common stock: Market: 3,000 bonds outstanding (8% coupon rate, $1,000 par value, 6 years to maturity, selling for 102 percent of par; the bonds make semi-annual payments) 75,000 shares outstanding selling for $50 per share; the beta is .85 10 percent market risk premium and 5 percent risk-free rate. Tax rate is 35%. (Hint: YTM (or ki) must be the interest rate per year.)

Answer rating: 100% (QA)

Answer To calculate the cost of debt we need to find the yield to maturity YTM of the bonds YTM is the total return anticipated on a bond if it is hel... View the full answer