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Paragraph Styles 2. (9 pt) Nashville Inc's asset beta is 0.85. R = 8.5%, R = 2.5%, Te = 30%. The company's target debt to
Paragraph Styles 2. (9 pt) Nashville Inc's asset beta is 0.85. R = 8.5%, R = 2.5%, Te = 30%. The company's target debt to equity ratio is 70%. The company's only debt is one outstanding bond issue that matures in 40 years. This bond issue has a coupon rate of 6%. Coupons are paid semi-annually. The bonds currently trade at 96% of face value. What is the company's cost of debt? (2 pt) (ii) What is the company's cost of equity? (4 pt) (ii) What is the company's WACC? (3 pt) 3. (10 pt) Pavos Inc. has EBIT of $30m every year forever. The firm is funded with $80m of debt
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