Peter's Audio has two bond issues outstanding. The first issue has a coupon rate of 7%, a par value of $2,000 per bond, matures in 20 years, has a total face value of $5 million, and is quoted as 105. The second issue has a coupon rate of 9%, a par value of $1,000 per bond, matures in 30 years, has a total face value of $10 million, and is quoted as 110. Both bonds pay interest semiannually. The firm has 105,000 shares of common stock outstanding at a market price of $22 a share with the cost of equity of 10.5%. There are 25,000 shares of 4.05%-preferred stock selling for $45 each with a face value of $100. The tax rate is 21%. What is the weighted average cost of capital?
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:
Peter's Audio has two bond issues outstanding. The first issue has a coupon rate of 7%, a par value of $2,000 per bond, matures in 20 years, has a total face value of $5 million, and is quoted as 105. The second issue has a coupon rate of 9%, a par value of $1,000 per bond, matures in 30 years, has a total face value of $10 million, and is quoted as 110. Both bonds pay interest semiannually. The firm has 105,000 shares of common stock outstanding at a market price of $22 a share with the
What is the weighted average cost of capital?
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