financial

lutt U UJU. DIVUTUP JUIITSIUMI S Karket value based capital structure, and calculate its WACC. Assume equity capital comes from retained earnings, and the tax rate is 40%. (14 The following information of Magnolia Milk Limited was given for your analysis: (Bonds: Issued $20 million in long-term bonds that now have 10 years remaining until maturity. The bonds, with a nominal value of $1,000.00, carry an 8% annual coupon but are selling in the market for $877.10. Equity: Issued 5 million common stocks with par value of $1.00 each and currently sells at $9.00 in the market. The stock has a beta of 1.45, 3-months treasury bills yields 5% and market portfolio offers an expected return of 14%. The company plans to achieve a targeted optimal capital structure of 50:50 equity and debt. Tax rate is 35%. a. What portion of the company is debt financed and what portion is equity financed? b. What are the after-tax cost of debt and the cost of equity? c. What is Magnolia current weighted-average cost of capital? d. If Magnolia was able to achieve the targeted optimal capital structure, what is the weighted- average cost of capital? e. Should Magnolia maintain its current capital structure or proceed with plan to achieve the targeted optimal capital structure? Why or why not? Explain. 1 d. Pa , 0 u UV, oda