Question
Texas Insturments currently has bonds that will mature in 5 years paying 2% semi-annual coupons. The par value of these bonds is $1,000 and are
Texas Insturments currently has bonds that will mature in 5 years paying 2% semi-annual coupons. The par value of these bonds is $1,000 and are trading at a price of $935. Based on these bonds what is Texas Insturments' cost of debt?
Olympic Lanes is currently worth 9 million dollars and is all equity-financed. The company's current cost of equity is 8% Olympic Lanes would like to issue debt worth 2 million dollars with a cost of debt of 5%. Assuming the Modigliani-Miller Theories hold perfectly, what will Olympic Lanes' new cost of equity after issuing the debt?
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