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Please answer both of them. Thank you 9. Bradshaw steel has a capital structure with 35% debt and 65% common equity. The YTM on the
Please answer both of them. Thank you
9. Bradshaw steel has a capital structure with 35% debt and 65% common equity. The YTM on the company's long-term bonds is 7%, and the firm estimates that its overall composite WACC is 11%. The firm uses the CAPM to determine its cost of equity. The risk-free rate is 4%, the market risk premium is 5.5%, and the company's tax rate is 40%. What is the beta on Bradshaw's stock? (HINT: Use the WACC to find ks, then use the CAPM to solve for the beta.) 10. Heavy Metal Corp. is a steel manufacturer that finances its operations with 47% debt, 9% preferred stock, and 44% equity. The interest rate on the company's debt is 10%. The preferred stock pays an annual dividend of $2 and sells for $17 a share. The company's common stock trades at $28 a share, and its current dividend (D) of $2 a share is expected to grow at a constant rate of 10% per year. The flotation cost of common equity is 12% of the dollar amount issued, while the flotation cost on preferred stock is 10%. The company's tax rate is 33%. Assume that the firm will not have enough retained earnings to fund the equity portion of its capital budget. What is the company's WACCStep by Step Solution
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