Question
SFE Inc. has 1 million shares of common stock outstanding at a book value of $40 per share. The stock trades for $50 per share.
SFE Inc. has 1 million shares of common stock outstanding at a book value of $40 per share. The stock trades for $50 per share. It also has $10 million in face value of debt (corporate bonds of 5 years with coupon rate 10.4%, paid semi-annually) that trades at 110% of face value. The company’s common stock has a beta of 1.2. Treasury bills yield 2% and the market return is 10%. The corporate tax rate is 35%.
What is the after-tax WACC?
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A D Total market value of the equity E F 1 a 50000000 3 10...Get Instant Access to Expert-Tailored Solutions
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Financial management theory and practice
Authors: Eugene F. Brigham and Michael C. Ehrhardt
12th Edition
978-0030243998, 30243998, 324422695, 978-0324422696
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