1. The Lenzie Corporation’s common stock has a beta of 1.6. If the risk-free rate is 5.6 percent and the expected return on the market is 10 percent, what is the company’s cost of equity capital?
2. Soprano's Spaghetti Factory issued 25-year bonds two years ago at a coupon rate of 7.5 percent. If these bonds currently sell for 108 percent of par value, what is the YTM? What is the current yield? What is the capital gains yield? Assume semi-annual compounding.
3. XYZ, inc. operates in a country whose risk-free rate is 2.45%. The expected return of the market in the country is 8.20 % and The company has a beta of 1.06. The company has a $10M Bank loan with an interest rate of 7% and a $12M line of credit at 14%. The total equity of the company is valued at $15M. The company’s corporate tax rate is 35%.What is the firms WACC?