What is the cost of debt

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1. Spartan Machinery stock trades at $60 per share with a beta of 1.5, an estimated market return of 12%, and a risk free rate of 5%. There are 20 million shares outstanding. The company has bonds with a face value $1 billion outstanding and a current quote of 98. The coupon rate (semiannual coupons) and there are 10 years to maturity. The company has a tax rate of 38%. What is the WACC?

2. Buckeye Partners has a bond issue currently outstanding that has 15 years left to maturity. The coupon rate is 8%, and coupons are paid semiannually. The bond is currently selling for $1,100.21 per $1,000 bond. What is the cost of debt?

Reference no: EM131508942

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