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The Saunders Investment Bank has the following financing outstanding.
Debt:
150,000 bonds with a coupon rate of 11 percent and a current price quote of 108; the bonds have 20 years to maturity. 320,000 zero coupon bonds with a price quote of 16 and 30 years until maturity. Assume semiannual compounding.
Preferred stock:
240,000 shares of 9 percent preferred stock with a current price of $67, and a par value of $100.
Common stock:
3,500,000 shares of common stock; the current price is $53, and the beta of the stock is .9.
Market:
The corporate tax rate is 25 percent, the market risk premium is 8 percent, and the risk-free rate is 5 percent. What is the WACC for the company?
Johnson Products earned $5.00 per share last year and paid a $1.90 per share dividend. If ROE was 11 percent, what is the sustainable growth rate?
Boyd & Bunge Inc. has earnings before interest and taxes of $149,000. Both the book and the market value of debt is $265,000. The unlevered cost of equity is 13.5% while the pre-tax cost of debt is 9%. The tax rate is 34%. What is Boyd & Bunge’s weig..
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You are considering a 10-year, $1,000 par value bond. Its coupon rate is 9%, how much should you be willing to pay for the bond?
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What are the components of the required rate of return on a share using the dividend growth model and CAPM?
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