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Please show all work and calculations, Thank You 2) Your company's balance sheet currently shows the following: Debt $500 million Equity 1500 million Total Assets
Please show all work and calculations, Thank You
2) Your company's balance sheet currently shows the following: Debt $500 million Equity 1500 million Total Assets $2000 million Bonds have a par value of $1000, 20 years to maturity and have a coupon rate of 11% paid semiannually. Other bonds with similar characteristics and risk currently have a yield to maturity of 10%. The book value of common stock price is $75 per share. The current stock price is $60 per share in the market. The last dividend paid by the stock was $3.00 and analysts expect dividend growth of 3% for the foreseeable future. Beta for your stock is 1.3 and the current risk-free return and market return are 5% and 10%, respectively. The tax rate is 40%. a) Find the market value and after-tax cost of debt. b) Find the market value and cost of equity using both the DCF and CAPM methods. c) Calculate the weighted average cost of capital using book values. Use either equity methodStep by Step Solution
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