MV corporation has debt with market value of $350 million, common equity with a book value of $250 million and prefeered stock worth $50 million. If its common stock trades at $70 per share and the corportation has 8 million shares outstanding, what weights should MV use in its WACC? PROBLEM 4-3 \begin{tabular}{|lr|} \hline \multicolumn{1}{|c|}{ Given } & \\ \hline Cost of debt & 5% \\ Tax Rate & 30% \\ Cost of equity & 15% \\ Debt/EV & 20% \\ \hline \end{tabular} Part a. Note: Please consider Debt/EV is 40% for the Part (b) Part b. \begin{tabular}{|l|c|c|} \hline & & \multicolumn{2}{c}{ Civen } \\ \hline Face value & $ & 1,000.00 \\ Current price & $ & 1,081.26 \\ Maturity & \multicolumn{2}{c}{8 years } \\ Terms & semi-annual interest only \\ Coupon rate & \multicolumn{2}{|c|}{7.25%} \\ \hline \end{tabular} \begin{tabular}{|l|} \hline Semi-annual YTM \\ Annual YTM \\ \hline Note:Toconvertthesemi-annualYTMtoitsannualYTMequivalentweperformthefollowingcomputation:=(1+.0298)n21. \\ \hline \end{tabular} PROBLEM 4-6 Solution a. Low ERP High ERP Cost of equity b. WACC with Low ERP