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Following is the book value-based balance sheet of DPG Comnanv. The DPG stock is currently trading at $25 per share and has beta of 1.25.
Following is the book value-based balance sheet of DPG Comnanv. The DPG stock is currently trading at $25 per share and has beta of 1.25. The bond of DPG Company is currently trading at $1025 per bond and has YTM of 9.5%. You are anticipating that the market return will be 10% and T-bill rate (risk-free rate) will be 3%. The tax rate is 40%. Compute: a. Prepare a market value-based balance sheet for DPG and find the weights for the Equities and . Bonds. [6 marks] b. Estimate the cost of debt (before-tax and after-tax) and cost of equity. [6 marks] c. Find the weighted average cost of capital (WACC). Hints: Use market value-based weights. [8 marks]
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