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XYZ Corp. has 10 million shares of common stock outstanding and 290,000 8% p.a. semi-annual bonds outstanding, par value of $1000 each. The common stock
XYZ Corp. has 10 million shares of common stock outstanding and 290,000 8% p.a. semi-annual bonds outstanding, par value of $1000 each. The common stock currently sells for $40 per share and has a beta of 2, bonds of 20 years to maturity and sell for 105% of par value. The market risk premium is 7%, T-bills are yielding 3.5% and XYZs tax rate is 35%.
What is the firms Debt/Equity capital structure where Debt and Equity is expressed as market values (nearest two decimal value)?
Select one:
a. 2.00
b. None of these
c. 1.36
d. 2.76
e. 0.76
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