Question
The following information relates to OMG Corporation: OMG Corporation has 2 million ordinary shares outstanding that are currently priced at $3 each and have a
The following information relates to OMG Corporation: OMG Corporation has 2 million ordinary shares outstanding that are currently priced at $3 each and have a beta of 0.2. Eight years ago the company issued bonds with a total face value of $3 million. One bond has a face value of $500,000. The bonds have a coupon rate of 3% p.a. and coupons are paid semi-annually. The bonds mature in seven years from today. The bonds currently yield 2% p.a.The company has 700,000 preference shares trading at $10 each. The return on the stock market is 6% p.a., the risk-free rate is 2% p.a., and the company tax rate is 30%. What proportion of the firm's capital structure is ordinary equity?
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