Question
Big Building Corp (BIG) currently has bonds outstanding with a face value of $1,000, a 6% annual coupon rate, and 8 years to maturity. The
Big Building Corp (BIG) currently has bonds outstanding with a face value of $1,000, a 6% annual coupon rate, and 8 years to maturity. The bonds currently sell for 102.50 percent of par. BIG's common stock has a beta of 1.20, and currently sells at $35 per share. Treasury bills yield 2.5% and the expected rate of return on the market is 8.5%. BIG's total bond debt has a face value of $5,000,000 and there are 300,000 shares outstanding. The marginal tax rate is 25%.
What is BIG's market cap?
What is BIG's market value of debt?
What is the weight on equity?
What is the weight on debt?
What is the cost of equity?
What is the pretax cost of debt?
What is BIG's WACC?
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