Question
Dani Corp. issued 20,000 bonds with 4.5 percent semiannual coupon and a face value of $1,000, three years ago. The yield to maturity of
Dani Corp. issued 20,000 bonds with 4.5 percent semiannual coupon and a face value of $1,000, three years ago. The yield to maturity of the bond is 6%. The bond currently sells for 104 percent of its face value today. The company has 150,000 shares outstanding, selling for $123. The beta is 1.5. The company's tax rate is 21%. The market risk premium is 7%. The risk-free rate is 2%. (4 marks) a. What is the company's cost of debt and cost of equity? b. What is company's capital structure (namely, the percent of equity and debt, respectively)? (4 marks) C. What is the company's cost of capital? (4 marks)
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Economics
Authors: Roger A. Arnold
12th edition
978-1305758674, 1305758676, 978-1285738321
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