A firm has 20 $1,000 face value bonds outstanding. The bonds pay annual coupons and have a coupon rate of 5%. The bonds are currently trading at a price of 1,015 and have 5 years until maturity. The firm also has 2,600 shares of common stock outstanding that trade for $17 per share. The market risk premium is 9%, the risk-free rate is 2.25% and the firm’s beta is 1.6. The corporate tax rate is 21%. What is the firm’s weighted average cost of capital?

A firm has 20 $1,000 face value bonds outstanding. The bonds pay annual coupons and have a coupon rate of 5%. The bonds are currently trading at a price of 1,015 and have 5 years until maturity. The...

A firm has 20 $1,000 face value bonds outstanding. The bonds pay annual coupons and have a coupon rate of 5%. The bonds are currently trading at a price of 1,015 and have 5 years until maturity. The firm also has 2,600 shares of common stock outstanding that trade for $17 per share. The market risk premium is 9%, the risk-free rate is 2.25% and the firm’s beta is 1.6. The corporate tax rate is 21%. What is the firm’s weighted average cost of capital?

Jun 04, 2022