Question
The common stock currently sells for 20 per share and there are 1 million common shares outstanding. Birmingham Corporation (all values in millions) Assets Liabilities
The common stock currently sells for 20 per share and there are 1 million common shares outstanding.
Birmingham Corporation (all values in millions)
Assets |
| Liabilities and Equity |
|
Cash & Marketable Securities | 1.0 | Bonds (annual coupon = 8%, maturity = 10 years, yield to maturity = 9%) | 10.0 |
Accounts Receivable | 3.0 | Common Stock (par value .10 per share) | 0.1 |
Inventories | 7.0 | Additional Paid in Stockholders' Capital | 9.9 |
Plant & Equipment | 21.0 | Retained Earnings | 12.0 |
Total | 32.0 | Total | 32.0 |
The beta of the stock is .8, the market risk premium is 10%, the risk-free rate is 6%, and the firm's tax rate is 40%,
What is the market value of Birmingham Corporation's debt? Assume the next annual interest coupon is due in exactly one year's time.
What's the WACC?
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