Question
Filer Manufacturing has 8.3 million shares of common stock outstanding. The current share price is $53, and the book value per share is $4. Filer
Filer Manufacturing has 8.3 million shares of common stock outstanding. The current share price is $53, and the book value per share is $4. Filer Manufacturing also has two bond issues outstanding. The first bond issue has a face value of $70 million and a coupon rate of 7 percent and sells for 108.3 percent of par. The second issue has a face value of $60 million and a coupon rate of 7.5 percent and sells for 108.9 percent of par. The first issue matures in 8 years, the second in 27 years. Suppose the companys stock has a beta of 1.2. The risk-free rate is 3.1 percent, and the market risk premium is 7 percent. Assume that the overall cost of debt is the weighted average implied by the two outstanding debt issues. Both bonds make semiannual payments. The tax rate is 35 percent.
What is Market Value of Equity? (Do not round intermediate calculations and enter your answer rounded to the nearest whole dollar amount, e.g., 1,234.)
What is the Total Market Value of Debt? (Do not round intermediate calculations and enter your answer rounded to the nearest whole dollar amount, e.g., 1,234.)
What is Total Market Value of the Company? (Do not round intermediate calculations and enter your answer rounded to the nearest whole dollar amount, e.g., 1,234.)
What is Market Value WEIGHT of Equity? (Do not round intermediate calculations and enter your answer rounded to 4 decimal places, e.g., 0.1234)
What is Market Value WEIGHT of Debt? (Do not round intermediate calculations and enter your answer rounded to 4 decimal places, e.g., 0.1234)
What is Cost of Equity? (Do not round intermediate calculations and enter your answer as a percent amount rounded to 2 decimal places, e.g., 12.34)
What is Yield to Maturity (YTM) of Bond 1 and Bond 2? (Do not round intermediate calculations and enter your answer as a percent amount rounded to 2 decimal places, e.g., 12.34)
What is the companys Weighted Average Cost of Capital (WACC)? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 12.34.)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started