Question
Sycamore Store balance sheet shows a total of $22 million long-term debt with a coupon rate of 7.50%. The yield to maturity on this debt
Sycamore Store balance sheet shows a total of $22 million long-term debt with a coupon rate of 7.50%. The yield to maturity on this debt is 6.50%. The balance sheet also shows that the company has 10 million shares of stock, and the stock has a book value per share of $6.00. The current stock price is $21.00 per share, and stockholders' required rate of return, r s, is 12.00%. The company recently decided that its target capital structure should have 35% debt, with the balance being common equity. The tax rate is 40%. Calculate WACCs based on the target capital structure.
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