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Problem 12-12 Finding the WACC Makai Metals Corporation has 9 million shares of common stock outstanding...

Problem 12-12 Finding the WACC

Makai Metals Corporation has 9 million shares of common stock outstanding and 340,000 6 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $38 per share and has a beta of 1.5, and the bonds have 20 years to maturity and sell for 119 percent of par. The market risk premium is 7.8 percent, T-bills are yielding 3 percent, and the company’s tax rate is 36 percent.

a. What is the firm's market value capital structure? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., 32.1616.)

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Answer #1

Current market value is (No of oustanding shares/bonds * Par value*Current selling price) Market value of debt is = (340000*1

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