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this is for my finance 310 class and i am very lost. all information should be in the screenshot A large industrial company has in

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this is for my finance 310 class and i am very lost. all information should be in the screenshot

image text in transcribed
A large industrial company has in recent years on average paid taxes worth 16% of its Earnings Before Taxes. but it is subject the current tax bracket of 28% on every dollar of additional earnings that it generates. The company is only nanced with these two nancial claims: ' 30 million bonds outstanding with $1.000 par value each, 4.2% coupons paid semiannually. 14 years to maturity. high investment grade rating. a quoted yield of 5.5%. and selling currently for 120.0% of par. ' 2,000 million shares of common stock selling for $27 per share with a 1.2 beta and 80% volatility. In nancial markets, the current riskfree interest rate is 2%. and equity investors expect a 5% market risk premium over safe investments. a) What is the weight of the debt in the company's current capital structure? ENTER YOUR ANSWER IN ONLY THREE DECIMALS. AND NOT IN PERCENT For example. if your answer is 42.4% debt. then type in this: .424 b) What is the company's current aftertax cost of debt. ENTER YOUR ANSWER IN PERCENT. For example. if your answer is 8.52%. then type in this: 8.52 without the percent sign c) What is the expected return that equity investors currently require to invest in shares of this company? ENTER YOUR ANSWER IN PERCENT. For example. if your answer is 3.53%. then type in this: 3.53 without the percent sign d) INSTEAD OF USING YOUR PREVIOUS ANSWERS IN parts ac above: The company targets 40% debt nancing in its capital structure. with the remaining in common stock. The CFO believes that the (pretax) cost of the company's debt nancing is 3% and that investors require an 7% return to buy its stock. The marginal tax rate is 28% What is her estimate of the rm's overall WACC? ENTER YOUR ANSWER IN PERCENT. For example. if your answer is 13.25%. then type in this: 13.25 without the percent sign

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