Answer to Question #292151 in Economics for KIKI

Question

JPM has the following capital structure. What is the WACC for the company?

 

Debt:

Bond 1. 400,000 bonds with a coupon rate of 6% (paid semi-annually), a price quote of 110.0 and have 20 years to maturity.

 

 

Bond 2. 300,000 zero coupon bonds (semi-annual compounding) with a price quote of 40.0 and 25 years until maturity.

 

Preferred stock:

600,000 shares of 4 percent preferred stock with a current price of $60, and a par value of $100.

 

Common stock:

12,000,000 shares of common stock, with a price of $80, and a beta of 1.3.

 

Market:

The corporate tax rate is 40 percent, the market risk premium is 9%, and the risk-free rate is 4%.

 

Answer 1

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