question archive A firm issued 1 million shares of common stock last year at $40 a share
A firm issued 1 million shares of common stock last year at $40 a share
Subject:FinancePrice: Bought3
A firm issued 1 million shares of common stock last year at $40 a share. Last year, it also issued a 15-year to maturity, $10 million of bonds at an annual coupon rate of 5%. What is the WACC this year if the price of the stock dropped to $35 a share and YTM is 3.5%? Assume that the bond- yield risk premium = 4%. Assume tax rate = 25% a. 6.28% b. 5.50% c. 6.50% d. 6.61% e. 6.42%
