Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

please help Phillips Equipment Inc. has 67,000 bonds outstanding that are each selling at $1,088 in the market. Each bond has 8 years left to

image text in transcribed

please help

Phillips Equipment Inc. has 67,000 bonds outstanding that are each selling at $1,088 in the market. Each bond has 8 years left to maturity, a $1000 face value and a coupon rate of 6%. Coupons are paid semiannually. The company also has 2.4 million shares of common stock outstanding. The common stock has a beta of 1.1 and sells for $43 a share. The U.S. Treasury bill is yielding 2.7 percent and the return on the market is 9 percent. The corporate tax rate is 35 percent. (a) Determine the firms market value weight for debt (Enter answers as a \% to 2 decimal places) % (b) Determine the firms market value weight for equity (Enter answers as a \% to 2 decimal places) (c) What is the firms after tax cost of debt? (Enter answers as a \% to 2 decimal places) (d) What is the firms cost of equity? (Enter answers as a \% to 2 decimal places) % (e) Using the information you have found in the earlier parts, determine the Cost of Capital for Phillips Equipment Inc. (Enter answers as a \% to 2 decimal places)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Finance questions