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Please show working and formulas used, thanks. Question 2 Magnificent Mattress Company (MM) has asked you to calculate its WACC. It has supplied the following
Please show working and formulas used, thanks.
Question 2 Magnificent Mattress Company (MM) has asked you to calculate its WACC. It has supplied the following information Cost of debt is 6% Book value of debt is $80,000 There are 64,000 ordinary shares outstanding The yield on government bonds is 4% The company plans to pay a dividend of $32,000 (in total) in a year The company's ROE is 14% and its plowback ratio is 50% The company's tax rate is 28% You have used compco analysis to estimate that an appropriate beta for MM is 1.1. You also believe that the expected return on the market is 11%. a) What is MM's cost of equity? b) What is the value of equity? c) What is MM'S WACCStep by Step Solution
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