1. What is the value of an annual bond with 10 years to maturity and a 10% coupon rate if current interest rates for similar bonds are currently 13%?
2. AFTER-TAX COST OF DEBT
The Holmes Company's currently outstanding bonds have a 7% coupon and a 14% yield to maturity. Holmes believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 40%, what is Holmes's after-tax cost of debt? Round your answer to two decimal places.
_______%
3. Your firm has market equity value of $6 million and debt outstanding of $4 million. The YTM of your debt outstanding is 6%, your cost of equity is estimated at 9%. Your corporate tax rate is 35%. Given this information, what is your firm’s WACC?