Question
ABC Ltd., manufacturer of consumer plastic products, is evaluating its capital structure. The balance sheet of the company is as follows (in millions): Assets Fixed
ABC Ltd., manufacturer of consumer plastic products, is evaluating its capital structure. The balance sheet of the company is as follows (in millions):
Assets
Fixed assets
Current assets
Liabilities
Debt $1,000
Equity
$2,500 $2.500
In addition, you are provided the following information:
The debt is in the form of long-term bonds, with a coupon rate of 10%. The bonds are currently rated AA and are selling at a yield of 12% (the market value of the bonds is 80% of the face value).
The firm currently has 50 million shares outstanding, and the current market price is $80 per share. The firm pays a dividend of 54 per share and has a price earnings ratio of 10.
The stock currently has a beta of 1.2, the risk free rate is und risk premium 5.3%
The tax rate for this firm is 40%.
What is the debt/equity ratio for this firm in book
value terms and in market value terms?
00G) What is the debt/(debt + equity) ratio for this firm in book value terms and in market value | erms?
PA () What is the firm's current WACC?
Please help me with this question
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