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Equity Information



50 million shares



$80 per share



Beta =

1.15



Market risk premium =

9%



Risk-free rate = 5%



Debt Information



$1 billion in outstanding

debt (face value)



Current quote = 110



Coupon rate = 9%,

semiannual coupons



15 years to maturity



Tax rate = 40%

What is the cost of debt?

N = 30; PV = -1100; PMT = 45; FV = 1000; CPT I/Y = 3.9268

RD= 3.927(2) = 7.854%

question: where are the PV, PMT and FV come from? (how to calculate single bond from entire face amount?)