I am having trouble with this finance problem, as I am overwhelmed with the amount of information that is provided and I just have no idea where to start. If someone with a finance background could help get me started, I would greatly appreciate it!
[I know the formula for WACC and I was able to compute the weighted averages of each, (Debt = 23.96%, Debt2 = 13.65%, Preferred Stock = 3.90%, Common Stock = 58.49%). Just not sure where to go from here! Thanks.]
The Saunders Investment Bank has the following financial outstanding:
Debt: 40,000 semi-annual, 25-year, 7% coupon bonds currently priced at 1198. 150,000s, 30-year zero coupon bonds priced at 182.
Preferred Stock: 100,000 shares of 4% preferred stock with a current price of $78 and par = $100
Common Stock: 1,800,000 shares of common stock; current price is $65 and the beta is 1.1
Market: The corporate tax rate is 40%, market risk premium is 7%, and the risk free rate is 4%.
What is the Bank’s WACC?
[I know the formula for WACC and I was able to compute the weighted averages of each, (Debt = 23.96%, Debt2 = 13.65%, Preferred Stock = 3.90%, Common Stock = 58.49%). Just not sure where to go from here! Thanks.]
The Saunders Investment Bank has the following financial outstanding:
Debt: 40,000 semi-annual, 25-year, 7% coupon bonds currently priced at 1198. 150,000s, 30-year zero coupon bonds priced at 182.
Preferred Stock: 100,000 shares of 4% preferred stock with a current price of $78 and par = $100
Common Stock: 1,800,000 shares of common stock; current price is $65 and the beta is 1.1
Market: The corporate tax rate is 40%, market risk premium is 7%, and the risk free rate is 4%.
What is the Bank’s WACC?
