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Please show all of your work, thank you On January 1 , the total market value of the Tysseland Company was $60 million. During the
Please show all of your work, thank you
On January 1 , the total market value of the Tysseland Company was $60 million. During the year, the company plans to railion in new projects. The firm's present market value capital structure, here below, is considered to be optimal. There is no short-term debt. New bonds will have an 9% coupon rate, and they will be sold at par. Common stock is currently selling at $30 a share. The stockholders $1.20, so the dividend yield is $1.20/$30=4%.) The marginal tax rate is 35%. a. In order to maintain the present capital structure, how much of the new investment must be financed by common equity? Enter your answer in dollars. For example, $1.2 million should be entered as $1200000. $ b. Assuming there is sufficient cash flow for Tysseland to maintain its target capital structure without issuing additional shares of equity, what is its WACC? Round your answer to two decimal places. % c. Suppose now that there is not enough internal cash flow and the firm must issue new shares of stock. Qualitatively speaking, what the WACC? No numbers are required to answer this question. I. rs will decrease and the WACC will increase due to the flotation costs of newity. II. rs and the WACC will not be affected by flotation costs of new equity. III. rs and the WACC will increase due to the flotation costs of new equity. IV. rs and the WACC will decrease due to the flotation costs of new equity. V. rs will increase and the WACC will decrease due to the flotation costs of new equityStep by Step Solution
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