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 110.0; the bonds have 20 years to maturity. 290,000 zero coupon bonds with a price quote of 17.5 and 30 years until maturity. 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?
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Ответ:
R_Wacc = 11,35% (48%) + 8,57% (4%) + 4,18% (35%) + 3,59% (13%) = 7,70%
Explanation:
Re: 11,35% Cost of Common Equity
Re: 8,57% Cost of Preferred STOCK
Re: 4,18% Cost of Debt BONDS
Rd: 3,59% Cost of Zero BONDS
Equity :$179,200,000 Market Value of the firm's Common Equity
Preferred Stock:$14,700,000 Market Value of the firm's Preferred STOCK
Debt bonds :$132,000,000 Market Value of the firm's Debt BONDS
Zero bonds :$49,300,000 Market Value of the firm's ZERO BONDS
V: $375,200,000 E+D = Total Market Value of the firm's financing
E/V: 48% Percentage of financing that is Common Equity
PS/V: 4% Percentage of financing that is Preferred Stock
DB/V: 35% Percentage of financing that is Debt Bonds
ZB/V: 13% Percentage of financing that is Zero Bonds
Tc: 40% Corporate tax rate
Total Market ValueMarket value of debt Bonds:
120,000 x $1,000 x 110% = $132,000,000
Market value of debt Zero Coupon:
290,000 x $1,000 x 17% = $49,300,000
Market value of preferred stock:
210,000 x $70 = $14,700,000
Market value of common stock:
3,200,000 x $56 = $179,200,000
TOTAL = $375,200,000
Using the CAPM model we can calculate the costo of equity:R = 0,04 + 1,05(0,07) = 11,35%
The cost of debt is the YTM of the bonds, so:P0= $1,110 = $40(PVIFAR%,40) + $1,000(PVIFR%,40) =
R = 6,97%
The aftertax cost of debt is:R_Bonds : (1 - 0,4) x (0,0697) = 4,18%
The aftertax cost of zero coupon bonds is:Yield To Maturity = (Face Value/Current Bond Price)^(1/Years To Maturity)−1 = 5,98%
(Face Value/Current Bond Price) = '$1,000/$175 (1/Years To Maturity) = 1/30
The aftertax cost of debt is:R_ZeroB : (1 - 0,4) x (0,0598) = 3,59%
We can use the preferred stock pricing equation, which is the level perpetuity equation, so the required return on the company’s preferred stock is:Rp= D1/P0 = $6/$70 = 8,57%
Rp = Required Return D1 = Dividend P0 = Price
Ответ: