Transcribed Image Text
1.GE has 20,000 bonds outstanding with a 7% coupon rate, paidsemiannual. There are 20 years left to maturity and have a marketprice of 990.00 (face value 1000). The company also has 700,000shares outstanding and currently sell at $32 a share. GE has a betaof 1.09. You expect the market risk premium to be 9% and the riskfree rate is currently 2%. Ge also has 200,000 shares of preferredstock which pays an annual dividend of $5. The preferred stock iscurrently trading at $29 a share. Assuming a 21% tax rate, what isthe WACC?2. You need to raise one billion dollar for a new project. JPMorgan states that they will charge you a 7.5% flotation fee onequity, and a 4.5% flotation fee on debt. If you don’t want toalter the company’s capital structure, which is currently aDebt-to-Equity Ratio of 0.5, how much do you need to raise so thatyou can fund your project?