The following information of Magnolia Milk Limited was given for your analysis: Bonds: Issued $20 million in long-term bonds that now have 10 years remaining until maturity. The bonds, with a nominal value of $1,000.00, carry an 8% annual coupon but are selling in the market for $877.10. Equity: Issued 5 million common stocks with par value of $1.00 each and currently sells at $9.00 in the market. The stock has a beta of 1.45, 3-months treasury bills yields 5% and market portfolio offers an expected return of 14%. The company plans to achieve a targeted optimal capital structure of 50:50 equity and debt. Tax rate is 35%.

a. What portion of the company is debt financed and what portion is equity financed?

b. What are the after-tax cost of debt and the cost of equity?

Q11;

Compute Nabla Theta And Verify Explicitly That Nabla Times (Nabla Theta) = 0 Theta(X. Y. Z) = X - Y + 2x^2