Question: (cost of capital) The company has curently 20000 s…
(cost of capital) The company has curently 20000 shares outstanding. The book value per share in 15€. The stock is currently trading at P/B ratio of 2,0, P/E=12 and EV/EBITDA=7,5. It is also known that the risk free rate is 4%,the beta of the stock is 2,0 and the market risk premium over risk free rate is equal to 5%.
The company is going to issue 8000 coupon bonds with the par value of 100€ per bond, 4% annual coupong rate. Similar bonds currently trade at 6% yield level. The bods will mature exactly 5 years from now.
a) Cost of dept and equity
b) The shares of dept and equity in capital structure
c) Find WACC and interpret your result