The expected return on the market is 12%.
The risk-free rate is 3.5%
Bacon Everything, INC! has a current stock price of $65. There are 15 million shares outstanding. The beta for the stock is 1.6.
Bacon Everything INC! has a plowback ratio of 40%.
Bacon Everything INC! has three different bond issues as follows:
- 8% coupon bonds with face value of $1000 that matures in 10 years. These bonds have a yield to maturity of 6% There are 250,000 of these.
-Zero- coupon bonds with face value of $1000 that mature in 3 years. These bonds have a yield to maturity of 3%. There are 300,000 of these bonds.
-10% coupon bonds with face value of $1000 that mature in 15 years and are currently trading at face value. There are 500,000 of these bonds.
Bacon Everything INC has an average tax rate of 30%
Bacon Everything INC! has no preferred stock.
1. What is the cost of equity for Bacon Everything INC?
2. What is bond value for the 8% coupon bonds outstanding? What are current yield and capital gains yield?
3. What is bond value for the zero-coupon bonds? What are current yield and capital gains yield?
4. What is the cost of debt for Bacon Everything, INC!?
5. Calculate WACC using market values to obtrain weights.
Please show all work and steps.