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A firm has 2,000,000 shares of common stock outstanding with a market price of $3.00 per share and a book value of $2.25 per share.
A firm has 2,000,000 shares of common stock outstanding with a market price of $3.00 per share and a book value of $2.25 per share. It has 3,000 bonds outstanding, quoted at 90 percent of par. The bonds mature in 15 years, have a coupon rate of 10% and pay semi-annually. The firm's beta is 1.4, T-bills are 3% and the market risk premium is 8%. The tax rate is 34%. What is the cost of equity? What is the cost of debt? What is the WACC? What is the weight for the equity?
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