Zonk Corp.

The following data pertains to Zonk Corp., a manufacturer of ball bearings (dollar amounts in millions):

Total assets	$7460
Interest-bearing debt	$3652
Average pre-tax borrowing cost	10.5%
Common equity:
Book value	$2950
Market value	$13685
Income tax rate	35%
Market equity beta	1.13

1.

Assuming that riskless rate is 4.6% and the market premium is 7.3%, calculate Zonks cost of equity capital:

Group of answer choices

10.4%

7.69%

11.89%

8.28%

2.

Using the above information, calculate Zonks weighted-average cost of capital:

Group of answer choices

11.5%

7.97%

7.48%

10.90%

3.

Determine the weight on debt capital that should be used to calculate Zonks weighted-average cost of capital:

Group of answer choices

21.7%

21.00%

50%

58.2%

4.

Assume that Zonk is a potential leveraged buyout candidate. Assume that the buyer intends to put in place a capital structure that has 70 percent debt with a pretax borrowing cost of 14 percent and 30 percent common equity. Compute the revised equity beta for Zonk based on the new capital structure.

Group of answer choices

4.35

4.77

4.34

3.91

5.

Assume that Zonk is a potential leveraged buyout candidate. Assume that the buyer intends to put in place a capital structure that has 70 percent debt with a pretax borrowing cost of 14 percent and 30 percent common equity. Compute the weighted average cost of capital for Zonk based on the new capital structure.

Group of answer choices

8.85%

12.56%

13.01%

9.94%

6.

Determine the weight on equity capital that should be used to calculate Zonks weighted-average cost of capital:

Group of answer choices

79.00%

78.3%

41.8%

50%

thank you so much