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What is the total market value of CC bonds

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Question - Coolah Corporation (CC) recently issued 10,000 bonds with a face value of $100 each. The bonds pay semi-annual coupons, their coupon rate is 5% p.a., and they will mature in 8 years' time. They are currently trading at a yield-to-maturity of 5.5% p.a., with semi-annual compounding. CC has 80,000 $10 6.5% preference shares outstanding, which are currently trading for $8 per share. It also has 150,000 ordinary shares outstanding, which are trading for $9.82 each. The beta of CC's ordinary shares is 0.96, the risk-free interest rate is 3.6% p.a., and the market risk premium is 7% p.a. The ordinary shares recently paid a dividend of $1.05 per share, and CC's tax rate is 30%.

(a) What is the total market value of CC's bonds?

(b) What is the total market value of CC's ordinary shares?

(c) What is the total market value of CC' preference shares?

(d) What is the required rate of return on CC's ordinary shares?

(e) What is the required rate of return on CC's preference shares?

(f) What is the weighted average cost of capital (WACC) for CC?

Reference no: EM132565525

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