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A Mining company has 4.3 million shares of common stock outstanding and 85,000 bonds outstanding, par value of $1,000 each. Each bond has a
A Mining company has 4.3 million shares of common stock outstanding and 85,000 bonds outstanding, par value of $1,000 each. Each bond has a 6.8 percent annual coupon rate and the bonds have 23 years to maturity and is now selling at $789.23. (Based on the current price, its YTM is 9%) Coupon is paid annually. The common stock currently sells for $58.00 per share and has a beta of 0.90. The market risk premium is 7 percent and Treasury bills are yielding 5 percent and the company's tax rate is 35 percent. a. What are the weight of debt component (D/V) in the firm's capital structure? (Round up your answer to the nearest two decimal points and answer in percentage. eg.11.22% only put 11.22 in the blank) b. What is the weight of equity component (E/V) in the firm's capital structure? (Round up your answer to the nearest two decimal points and answer in percentage. eg.11.22% only put 11.22 in the blank) Answer:
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