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PLEASE ANSWER ALL THE EMPTY BOX The following table gives the balance sheet for Travellers Inn Inc. (TII), a company that was formed by merging
PLEASE ANSWER ALL THE EMPTY BOX
The following table gives the balance sheet for Travellers Inn Inc. (TII), a company that was formed by merging a number of regional motel chains. 4. The stock has a beta of 1.6 . The T-bond rate is 4%, and RPM is estimated to be 5%. premium over TII bonds of 3 percentage points. 6. TII is in the 25% federal-plus-state tax bracket. assets TII now operates. Based on your analysis, answer the following questions. Do not round intermediate calculations. Round your answers to two decimal places. a. What are the current market value weights for debt, preferred stock, and common stock? (Hint: Do your work in dollars, not millions of dollars.) b. What is the after-tax cost of debt? % c. What is the cost of preferred stock? % d. What is the required return on common stock using CAPM? % % f. What is the required return on common stock using the own-bond-yield-plus-judgmental-risk-premium approach? % g. What is Travellers' WACC? Use the required returns on stock from part e. %Step by Step Solution
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