Answered step by step
Verified Expert Solution
Question
1 Approved Answer
What If Tesla has 100,000 bonds outstanding that are selling at par value. Assume that the bonds yield 9.6 percent. Assume that Tesla also has
What If Tesla has 100,000 bonds outstanding that are selling at par value. Assume that the bonds yield 9.6 percent. Assume that Tesla also has 4.1 million shares of common stock outstanding. The stock has a beta of 1.3 and sells for $60 a share. The U.S. Treasury bill is ylelding 6 percent and the market risk premium is 9 percent. Tesla's tax rate is 35 percent. What is Tesla's weighted average cost of capital? 14.39 percent 12.58 percent 7.20 percent 10.78 percent 15.90 percent 6. Red Shoe Co has concluded that additional equity financing will be needed to expand operations and that the needed funds will be best obtained through a rights offering. It has correctly determined that as a result of the rights offering, the share price will fall from $140 to $105 ($140 is the rights-on price: $105 is the ex- rights price, also known as the when-issued price). The company is seeking $20 million In additional funds with a per-share subscription price equal to S70. How many shares are there currently, before the offering? (Assume that the increment to the market value of the equity equals the gross proceeds from the offering.) 300,000 274,286 297,143 285,714 0 291,429
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started