Question
Grupo Basso bonds yield 8.32%, mature in 10 years, and sell for $978.50. The firm's policy is to use a risk premium of 8 percentage
Grupo Basso bonds yield 8.32%, mature in 10 years, and sell for $978.50. The firm's policy is to use a risk premium of 8 percentage points when using the bond-yield-plus-risk-premium method to find Rs. The firm could sell, at par, $100 preferred stock, which pays a 12 percent of par annual dividend, but flotation costs will be 5 percent. What is Grupo Basso's cost of retained earnings using the bond-yield-plus-risk-premium approach?
Suede Corps stock sells for $50.00 per share and their bonds sell at par and have a face value of $1000. If the company has 2500 bonds outstanding and 150,000 shares outstanding, then what is Suede's capital structure value for we, the weight of equity?
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