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Suppose the rate of return on a 10-year T-bond is 7.50%, the expected average rate of inflation over the next 10 years is 2.40%, the
Suppose the rate of return on a 10-year T-bond is 7.50%, the expected average rate of inflation over the next 10 years is 2.40%, the MRP on a 10-year T-bond is 0.90%, no MRP is required on a TIPS, and no liquidity premium is required on any Treasury security. Given this information, what should the yield be on a 10-year TIPS? Disregard cross-product terms, Le, if averaging is requirit, use the arithmetic average a. 4.20% 6.5.10% C6.45% d. 660% 4.10% Bolster Foods' (BF) balance sheet shows a total of $26 million long-term debt with a coupon rate of 8.50% The yield to maturity on this debt is 8.00%, and the debt has a total current market value of $32 million. The balance sheet also shows that the company has 10 million shares of stock, and the stock has a book value per share of $4.00. The current stock price is $24.00 per share, and stockholders' required rate of return, r, is 13.50%. The company recently decided that its target capital structure should have 40% debt, with the balance being common equity. The tax rate is 25%. Calculate WACCs based on book, market, and target capital structures, and then find the sum of these three WACCS Do not round your intermediate calculations. 33.66% b. 34.00% 35.49 0.28.44% 26.61%
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