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Bonds outstanding Settlement date Maturity date Annual coupon rate Coupons per year Bond price (% of par) Par value ($) 50,000 1/1/20 1/1/35 5.10% 2 104.50 1,000 Bond 2: Bonds outstanding Settlement date Maturity date Annual coupon rate Coupons per year Bond price (% of par) Par value ($) 30,000 1/1/20 1/1/50 0% 2 23.60 10,000 Common stock Shares outstanding Beta Share price 2,100,000 1.08 79 Preferred stock outstanding Shares outstanding Coupon rate Share price 235,000 3.60% 87 $ Market Market risk premium Risk-free rate Tax rate 7.00% 3.60% 23% Output Area: Market value of Bond 1 Market value of Bond 2 Market value of equity Market value of preferred Market value of firm Bond 1 pretax cost Bond 1 aftertax cost Bond 2 pretax cost Bond 2 aftertax cost Cost of equity Cost of preferred WACC Preferred Stock and WACC The Saunders Investment Bank has the following financing outstanding. What is the WACC for the company? Debt: 50,000 bonds with a coupon rate of 5.1 percent and a current price quote of 104.5; the bonds have 15 years to maturity and a par value of $1,000. 30,000 zero coupon bonds with a price quote of 23.6, 30 years until maturity and a par value of $10,000. Both bonds have semiannual compounding. Preferred stock: 235,000 shares of 3.6 percent preferred stock with a current price of $87 and a par value of $ 100. Common stock: 2,100,000 shares of common stock; the current price is $79 and the beta of the stock is 1.08. Market: The corporate tax rate is 23 percent, the market risk premium is 7 percent, and the risk-free rate is 3.6 percent