Q#6 Assume that your company currently has the following characteristics: D/V = .20 Rf = 3% E/V = .80 Beta =1.20 Market Risk Premium = 5.0% tax rate = 30% In addition, you obtain the following data about the company's bond. The company's 25 year bond is trading in the market place at 85% of par. The bond carries a coupon rate of 6% and pays interest semi-annually. A. Estimate the current cost of debt and equity of the company. B. Estimate the WACC of the company.

1. If you invest in a $1,000 bond and pay a price of $832, and the coupon rate on the bond is 4%, what is your “Current Yield” on your investment?:a. It is 4.81%. b. 5.67%c. 3.21%d. 4.29%

Q1. (a) Suppose a 6 percent coupon, $1,000 bond with ten years left to maturity is selling for $1,100.What is the yield, assuming that interest is paid quarterly? (b) Assume that the bond in (a) above pays interest semi-annually. What would the bond sell for, given that the investor/market wants to earn the same yield as calculated in (a)? c) Assume that the bond in (a) above pays interest monthly. What would the bond sell for, given that the investor/market wants to earn the same effective yield as calculated in (a)? Q2. A firm has just issued (January 1, 2019) a bond that has a face value of $1,000, a coupon rate of 6 percent paid semi-annually (June 30, December 31), and matures in 8 years. The bonds were issued with a yield to maturity of 7%. What price were the bonds issued at? Assume that on July 1, 2021, the bond trades to earn an effective yield of 10%. At what price should this bond be trading for on July 1, 2021? PRICE WHEN ISSUED: PRICE ON JULY 1, 2021: Q3.  (a) (a) You are…

What is the price of a zero coupon bond with a $1,000 face value, 10-year maturity, and annual compounding? The market rate on similar bonds is 8%. a. $ 463.193 b. $ 655.228 c. $934.516 d. $ 1000 I