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Question: The Saunders Investment Bank has the following financing outstanding.

Debt: 120,000 bonds with a coupon rate of 8 percent and a current price quote of 110; the bonds have 20 years to maturity. 290,000 zero coupon bonds with a price quote of 17.5 and 30 years until maturity. Assume semiannual compounding.

Preferred stock: 210,000 shares of 6 percent preferred stock with a current price of $70, and a par value of $100.

Common stock: 3,200,000 shares of common stock; the current price is $56, and the beta of the stock is 1.05.

Market: The corporate tax rate is 40 percent, the market risk premium is 7 percent, and the risk-free rate is 4 percent. What is the WACC for the company? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Solve: WACC (percentage)

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M93066040

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