Question
Vesa Corporation has 6.4 million shares of common stock outstanding, 200,000 shares of 3.8 percent preferred stock outstanding, par value of $100, and 120,000 bonds
Vesa Corporation has 6.4 million shares of common stock outstanding, 200,000 shares of 3.8 percent preferred stock outstanding, par value of $100, and 120,000 bonds with par value $1,000 each. The common stock currently sells for $54 per share and has a beta of 1.08, the preferred stock currently sells for $103 per share, and the bonds have 15 years to maturity and sell for 107 percent of par and YTM of the bonds before tax is 4.17 percent. The market risk premium is 7.5 percent, T-bills are yielding 2.4 percent, and the companys tax rate is 22 percent.
A.What is the firms market value capital structure?
B.For projects equally as risky as the firm itself, the WACC should be used as the discount rate.
Do not use the excel
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