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HELP ASAP (Estimated time allowance: 20 minutes) FlightUp Inc.'s equity beta is 0.8 and FlightUp currently does not use any debt at all (it is
HELP ASAP
(Estimated time allowance: 20 minutes) FlightUp Inc.'s equity beta is 0.8 and FlightUp currently does not use any debt at all (it is an all-equity firm). The firm has 5,000,000 shares selling for $20 per share. FlightUp Inc. will sell $25,000,000 in corporate bonds with a $1,000 par value. The bonds have a yield to maturity of 10%. When the bonds are sold, the beta of the company will increase to 1.4. FlightUp will use the entire proceeds of the bond sale to repurchase an equal dollar amount of its equity (buyback shares). The corporate tax rate is 30%. The current risk-free rate is 2%. The market risk premium is 12%. For your answer, do not enter (use) the $ symbol, use commas to separate thousands; What is the market value of FlightUp (V) before the bond sale? A 2. What is the market value of equity after the bond sale? Do not use dollar sign. Round to the nearest dollar. Use commas to separate thousands A 3. What is the market value of debt after the bond sale? Do not use dollar sign. Round to the nearest dollar. Use commas to separate thousands. A 4. What is the weight for equity in the capital structure (the value D/V) - used to compute the WACC? Enter using the %, for example if you obtain 0.20 then enter 20% A 5. What is the cost of debt after the bond sale? Enter using the % and TWO decimal places, for example if you obtain 4.20% then enter 4.20% A 6. What is the cost of equity after the bond sale? Enter using the % and TWO decimal places, for example if you obtain 4.20% then enter 4.20% A 7. What is the adjusted WACC of FlightUp Inc. after the bond sale? Enter using the % and TWO decimal places, for example if you obtain 4.20% then enter 4.20% A/ Step by Step Solution
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