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The balance sheet of Wisconsin Dairy Products, in millions of dollars, is shown below: In addition, the following information is provided: ( 1 ) The
The balance sheet of Wisconsin Dairy Products, in millions of dollars, is shown below:
In addition, the following information is provided:
The debt consists of year, semiannual, $ bonds, presently selling at $
Floatation costs on new bonds would raise the effective beforetax interest cost to above the
yield to maturity on existing debt.
The company has million shares of common stock outstanding, with a market price of $ a
share. The stock has a beta of The riskfree rate is and the average market risk premium
is Floatation costs would raise the effective cost of new equity by over the cost of existing
equity.
Over the next year, which is the company's capital investment planning period, the company
expects to have a net income of $ million, half of which will be paid out as dividends.
The company faces a tax rate of
a With the given information, determine the number of year bonds outstanding.
b Determine the weights of debt and equity using i the book values and ii the market values.
c Determine the cost of debt, cost of retained earnings, and cost of new common stocks.
d Determine the breakpoints using book value weights.
e Plot the marginal cost of capital schedule for Wisconsin Dairy Products using book value weights. Show
all necessary work.
f Determine the breakpoints using market value weights.
g Plot the marginal cost of capital schedule for Wisconsin Dairy Products using market value weights.
Show all necessary work.
please help me with questions dg thank you
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