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What is the cost of coupon debt

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Reference no: EM132740122

Mature Industries (MI) Inc. has the following financing outstanding:

  • 40,000 bonds with 8% coupon (semiannual paid), face value = $1,000, price = 160% (Bonds price quoted as a percentage of the face value), 10 years maturity
  • 10,000 zero coupon bonds, Face Value = $1,000, price = 75%, maturity = 10 years
  • 50,000 shares of common stock, price = $50, beta = 1.2

Additional information: Tax rate = 30%, market risk premium = 8%, risk-free rate = 2%

(a) What is the cost of coupon debt? 

(b) What is the cost of zero-coupon debt? 

(c) What is the cost of equity?

(d) What is the WACC?

Reference no: EM132740122

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