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A company wishes to obtain capital by issuing bonds and shares. The bond will pay a coupon that is 4% of the bond's face value
A company wishes to obtain capital by issuing bonds and shares. The bond will pay a coupon that is 4% of the bond's face value every six months. Investors are able to get 2% returns on their investments risk free and the overall stock market is expected to generate 7% returns on investments. For this company, βS = 1.5. In addition, the tax rate is 17%. If the company wishes to restrict the cost of capital to at most 8% each year, what is the minimum proportion of capital they need to raise by is
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