Question
Promo Pak has compiled the following financial data: Source of Capital Book Value Market Value Cost Long-Term Debt $10,000,000 $8,800,000 Find?% Preferred Stock 1,000,000 1,200,000
Promo Pak has compiled the following financial data:
| Source of Capital | Book Value | Market Value | Cost |
| Long-Term Debt | $10,000,000 | $8,800,000 | Find?% |
| Preferred Stock | 1,000,000 | 1,200,000 | 12.0% |
| Common Stock Equity | 9,000,000 | 15,000,000 | Find?% |
| $20,000,000 | $25,000,000 |
a. $100 par value 7 years 6% debenture is selling at market for $97 b. Assuming tax rate is 25% compute the after cost of debt c. Beta is 1.65 the risk free is 5% and market return is 12 % d. Calculate the weighted average cost of capital using book value weight.
e Calculate the weighted average cost of capital using market value
f Discuss the correct expected return by contrasting book and market value weights
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The Mining Valuation Handbook Mining And Energy Valuation For Investors And Management
Authors: Victor Rudenno
4th Edition
0730377075, 978-0730377078
