Preferred Stock and WACC The Saunders Investment Bank has the following financing outstanding. What is the WACC for the company?
Debt : 40,000 bonds with a 7 percent coupon rate and a current price quote of 119.80; the bonds have 25 years to maturity. 1 50,000 zero coupon bonds with a price quote of 18.2 and 30 years until maturity.
Preferred stock : 1 00,000 shares of 4 percent preferred stock with a current price of $78, and a par value = $1 00.
Common stock : 1 ,800,000 shares of common stock; the current price is $65, and the beta of the stock is 1.1.
Market : The corporate tax rate is 40 percent, the market risk premium is 7 percent, and the risk-free rate is 4 percent.