Amazon has 20,000 bonds outstanding, each with a face value of $1,000. 13,000 of the 20,000 bonds pay a semi-annual coupon of 6% p.a. with 10 years left to maturity and an effective annual yield to maturity of 7%. 7,000 of the 20,000 bonds pay an annual coupon of 9% p.a. with 12 years left to maturity and an effective annual yield to maturity of 8%. The most recent coupon for both types of bonds have just been paid. Amazon effective tax rate is 35%. Amazon has 10 million ordinary shares outstanding which are currently trading at $4 per share. Amazon’s beta is 1.5, the risk-free rate is 5%, and the expected return on the market portfolio is 15%. Using the capital asset pricing model to estimate the cost of equity, what is Amazon’s after-tax weighted average cost of capital? (Round to the nearest two digits)

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Debenture Valuation

A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.

Note Valuation

It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like: