The Lewin Inc. has the following financing outstanding. What is the WACC for the company? Debt 60,000 bonds with an 8 % coupon rate and a quoted price of 110; the bonds have 30 years to maturity; the bonds make annual payments; $1,000 par value. 100,000 shares of 6% preferred with a current price of $150, and a par value of $100. 2,000,000 shares of common stock, the current price is $80, and the beta of the stock is 1.2 The corporate tax rate is 25%, the market risk premium is 6%, and the risk-free rate is 3% Preferred stock Common stock Market Required: (1) What is the aftertax cost of the debt?
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:
The Lewin Inc. has the following financing outstanding. What is the WACC for the company? Debt 60,000 bonds with an 8 % coupon rate and a quoted price of 110; the bonds have 30 years to maturity; the bonds make annual payments; $1,000 par value. 100,000 shares of 6% preferred with a current price of $150, and a par value of $100. 2,000,000 shares of common stock, the current price is $80, and the beta of the stock is 1.2 The corporate tax rate is 25%, the market risk premium is 6%, and the risk-free rate is 3% Preferred stock Common stock Market Required: (1) What is the aftertax cost of the debt?
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