You have the following information about a company: Debt: 5,000 3% bonds with twelve years to maturity. The face value of the bond is $1000. The bonds currently sell for $1190 and the bonds make semi-annual payments Equity: 125,000 shares outstanding selling for $65 per share. The beta is 1.35. The last dividend paid was $3.25. Market: There is a 5% market risk premium. The risk free rate is 2%. The corporate tax rate is 25% Given the above information, calculate the firm’s WACC.
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:
You have the following information about a company:
Debt: 5,000 3% bonds with twelve years to maturity. The face
Equity: 125,000 shares outstanding selling for $65 per share. The beta is 1.35. The last dividend paid was $3.25.
Market: There is a 5% market risk premium. The risk free rate is 2%.
The corporate tax rate is 25%
Given the above information, calculate the firm’s WACC.
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