Question
PHC Inc. currently has 7,200 shares outstanding, selling at $52.5 per share. It also has a $242,000 perpetual debt that pays 4% annual coupon and
PHC Inc. currently has 7,200 shares outstanding, selling at $52.5 per share. It also has a $242,000 perpetual debt that pays 4% annual coupon and is trading to yield 6.7%. The EBIT is expected to be $101,000 forever. The tax rate is of 29%.
- What is the unlevered cost of equity?
- What is the WACC?
- If PHC borrows additional $110,000 perpetual debt at 6.7%, what will be the stock price? The cost of equity? The WACC?
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Foundations of Financial Management
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen
16th edition
125927716X, 978-1259687969, 1259687961, 978-1259277160
