Question
The current liabilities consist entirely of notes payable to banks, and the interest rate on this debt is 10 percent, the same as the rate
The current liabilities consist entirely of notes payable to banks, and the interest rate on this debt is 10 percent, the same as the rate on new bank loans. The long-term debt consists of 30,000 bonds, each of which has a par value of $1,000, carries an annual coupon interest rate of 6 percent, and matures in 5 years. The current rate of interest on new long-term debt is 10 percent and this is the present yield to maturity on the firms bonds. The common stock sells at a price of $60 per share. The tax rate is 35 percent. There is no flotation cost.
Find
1. Calculate M&Ms market value capital structure.
2. If the firms beta is 1.8, the risk-free rate is 6.3 percent, and the expected equity market risk premium is 9 percent, what will be the M&Ms weighted average cost of capital?
Suppose the M\&M Company has this book value balance sheetStep by Step Solution
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