The Saunders Investment Bank has the following financing outstanding. Debt: 10,000 bonds with a coupon rate of 11...

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Finance

The Saunders Investment Bank has the following financingoutstanding.
Debt: 10,000 bonds with a coupon rate of 11 percent and a currentprice quote of 109.5; the bonds have 20 years to maturity. 180,000zero coupon bonds with a price quote of 20 and 30 years untilmaturity. Both bonds have a par value of $1,000. Assume semiannualcompounding.
Preferred stock: 100,000 shares of 9 percent preferred stock with a currentprice of $84, and a par value of $100.
Common stock: 2,100,000 shares of common stock; the current price is $70, andthe beta of the stock is 1.4.
Market: The corporate tax rate is 35 percent, the market risk premiumis 6 percent, and the risk-free rate is 3 percent.

What is the WACC for the company? (Do not roundintermediate calculations. Enter your answer as a percent roundedto 2 decimal places, e.g., 32.16.)

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Answer Debt Bond 1 Number of bonds outstanding 10000 Face Value 1000 Current Price 10950 1000 1095 Value of Debt 10000 1095 Value of Debt 10950000 Annual Coupon Rate 11 Semiannual Coupon Rate 550 Semiannual Coupon 5501000 55 Time to Maturity 20 years Semiannual Period to Maturity 40 Let semiannual YTM be i 1095 55 PVIFAi 40 1000 PVIFi 40 Using financial calculator N 40 PV 1095 PMT 55 FV 1000 I 495 Semiannual YTM 495 Annual YTM 2 495 See Answer

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The Saunders Investment Bank has the following financingoutstanding.Debt:10,000 bonds with a coupon rate of 11 percent and a currentprice quote of 109.5; the bonds have 20 years to maturity. 180,000zero coupon bonds with a price quote of 20 and 30 years untilmaturity. Both bonds have a par value of $1,000. Assume semiannualcompounding.Preferred stock:100,000 shares of 9 percent preferred stock with a currentprice of $84, and a par value of $100.Common stock:2,100,000 shares of common stock; the current price is $70, andthe beta of the stock is 1.4.Market:The corporate tax rate is 35 percent, the market risk premiumis 6 percent, and the risk-free rate is 3 percent.What is the WACC for the company? (Do not roundintermediate calculations. Enter your answer as a percent roundedto 2 decimal places, e.g., 32.16.)

Debt:	10,000 bonds with a coupon rate of 11 percent and a currentprice quote of 109.5; the bonds have 20 years to maturity. 180,000zero coupon bonds with a price quote of 20 and 30 years untilmaturity. Both bonds have a par value of $1,000. Assume semiannualcompounding.

Preferred stock:	100,000 shares of 9 percent preferred stock with a currentprice of $84, and a par value of $100.

Common stock:	2,100,000 shares of common stock; the current price is $70, andthe beta of the stock is 1.4.

Market:	The corporate tax rate is 35 percent, the market risk premiumis 6 percent, and the risk-free rate is 3 percent.