1) Susie Corp. has 6 million shares of common stock outstanding. Present share price is $89, and book value per share is= $8. Susie Corp. also has 2 bond issues outstanding. First bond issue has the face value of= $85 million, has coupon rate of 6%, and sells for 96 percent of par. Second issue has the face value of $60 million, has the coupon rate of 7%, and sells for 109% of par. First issue matures in 21 years, second in 9 years.
2) Assume the most current dividend was $6.10 and dividend growth rate is 8%. Suppose that overall cost of debt is weighted average of that implied by two outstanding debt issues. Both bonds make semi-annual payments. Tax rate is 35%. What is the company’s WACC?
i) What is quantitative easing (QE)?
ii) How does QE help the economy?
iii) What is tapering the QE?
iv) How do financial markets react to QE tapering news? Why do that react this way?