service. Spot will finance the project in a pattern similar to it's current financing. The firm's common
stock is selling in the market at $583 per share; the market is believed to be in equilibrium. Spotify
does not pay a dividend as the company reinvests all available funds for growth. The market is
currently requiring a 6.5% premium and Tbonds are currently yielding 4.5%. Preferred stock is selling
in the market at $75 per share. The preferred pays an annual dividend of $6.80 per share. Spot's
current bonds are twenty year, $1000 par bonds with a coupon rate of 8% and are selling at a price
of $975 per bond. Interest is paid semi-annually on the bonds. The firm faces a 35 percent marginal
tax rate and the Yahoo! beta of the firm is estimated at 1.90. Currently, there are 1,740,000 shares
of common stock outstanding, 1,300,000 shares of preferred stock outstanding, and 397,500
outstanding bonds. Spot's partial balance sheet is shown below.
Fig: 1