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Zubir's Construction Co. has 80,000 bonds outstanding that are selling at par value. Bonds with similar characteristics are yielding 8.5%. The company also has 4
- Zubir's Construction Co. has 80,000 bonds outstanding that are selling at par value. Bonds with similar characteristics are yielding 8.5%. The company also has 4 million shares of common stock outstanding. The stock has a beta of 1.1 and sells for RM40 a share. The Malaysian Treasury bill is yielding 4% and the market risk premium is 8%. Zubir's tax rate is 35%. What is Zubir's weighted average cost of capital?
- Explain what capital structure is and why managers should set the firm's capital structure.
v. Briefly explain Modigliani and Miller (MM) Proposition I without taxes.
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