Thorpe and Company is currently an all equity firm It has 3 million shares selling for $28 per share Its beta is 0 85 and the current risk free rate is 2 5 The expected return on the market for the coming year is 13 Thorpe will sell corporate bonds for $28,000,000 and retire common stock with the p...

Before the sale of bonds the weighted average cost of capital is the cost o ...

Thorpe and Company is currently an all equity firm. It has 3 million shares selling for $28

Question:

Thorpe and Company is currently an all equity firm. It has 3 million shares selling for $28 per share. Its beta is 0.85 and the current risk-free rate is 2.5%. The on the market for the coming year is 13%. Thorpe will sell corporate bonds for $28,000,000 and retire with the proceeds. The bonds are twenty-year semiannual bonds with a 10% rate and $1,000 par value. The bonds are currently selling for $1,143.08 per bond. When the bonds are sold, the beta of the company will increase to 0.95. What was WACC of Thorpe and Company before the bond sale? What is the adjusted WACC of Thorpe and Company after the bond sale if the corporate tax rate is 40%?

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these...