Reference no: EM132774964
Question - The Saunders Investment Bank has the following financing outstanding.
Debt: 40,000 bonds with a coupon rate of 7 percent and a current price quote of 114; the bonds have 20 years to maturity. 210,000 zero coupon bonds with a price quote of 21.5 and 30 years until maturity. Both bonds have a par value of $1,000. Assume semiannual compounding.
Preferred stock: 130,000 shares of 5 percent preferred stock with a current price of $78, and a par value of $100.
Common stock: 2,400,000 shares of common stock; the current price is $64, and the beta of the stock is 1.45.
Market: The corporate tax rate is 40 percent, the market risk premium is 7 percent, and the risk-free rate is 4 percent.
Required - What is the WACC for the company?
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