Reference no: EM13946828
DATA:
-The expected return on the market is 12%
-The risk-free rate is 3.5%
-Donuts R Us has a current stock price of $65. There are 15 million shares outstanding. The beta for the stock is 1.6
-Donuts R Us has a plowback ratio of 40%
-Donuts R Us has 3 different bonds issued as follows:
1. 8% coupon bonds with face value of $1000 that mature in 10 years. These bonds have a yield to maturity of 6%. There are 250,000 of these bonds.
2. Zero-coupon bonds with face value of $1000 that mature in 3 years. These bonds have a yield to maturity of 3%. There are 300,000 of these bonds.
3. 10% coupon bonds with face value of $1000 that mature in 15 years and are currently trading at face value. There are 500,000 of these bonds.
-Donuts R Us has an average tax rate of 30%
-Donuts R Us has no preferred stock
A) What is the cost equity for Donuts R Us?
B) What is the bond value of the 8% coupon bonds outstanding? What are current yield and capital gains yield?
C) What is bond value for the zero-coupon bonds? What are current yield and capital gains yield?
D) What is the cost of debt for Donuts R Us?
E) Calculate WACC using market values to obtain weights.
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: 8% coupon bonds with face value of $1000 that mature in 10 years. These bonds have a yield to maturity of 6%. There are 250,000 of these bonds. What is the cost equity for Donuts R Us? What is the bond value of the 8% coupon bonds outstanding? What a..
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