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Urban Housing Ltd currently has the following capital structure: Debt: $2,500,000 paying 6.5% coupon bonds outstanding with 5 years to maturity, an annual before-tax yield

Urban Housing Ltd currently has the following capital structure:

Debt: $2,500,000 paying 6.5% coupon bonds outstanding with 5 years to maturity, an annual before-tax yield to maturity of 5% on a new issue. The bonds currently sell for $1,065 per $1,000 face value.

Ordinary Shares: 35,000 shares outstanding currently selling for $25 per share. The company just paid a $4.50 dividend per share and is experiencing a 2% growth rate in dividends, which it expects to continue indefinitely.

(Note - The firm's marginal tax rate is 30%.)

Required:

  1. Calculate the current total market value of the company.
  2. Calculate the capital structure of the company.
  3. Calculate the weighted average cost of capital (WACC) for the company.

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