Question
Consider the following information for Federated Junkyards of America. Debt: $69,000,000 book value outstanding. The debt is trading at 95% of book value. The yield
Consider the following information for Federated Junkyards of America.
Debt: $69,000,000 book value outstanding. The debt is trading at 95% of book value. The yield to maturity is 10%.
Equity: 1,900,000 shares selling at $36 per share. Assume the expected rate of return on Federateds stock is 19%.
Taxes: Federateds marginal tax rate is Tc = 0.21.
Calculate the weighted-average cost of capital (WACC).
(Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
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Handbook Of The Economics Of Finance
Authors: George M. Constantinides, Milton Harris, Rene M. Stulz
1st Edition
044459406X, 978-0444594068
