Equity Information i. 50 million shares ii. $80 per share iii. Beta = 1.11 iv. Market...
Problem 9 You are given the following information about a firm and the equity-debt structure of this firm: i) The amount of long-term outstanding debt is 150,000. ii) The debt is risk-free and is financed at an interest rate of 7%. iii) Number of shares of common stock is 40,000. iv) The price per share is 15. v) The stock's beta is 1.2. vi) The expected market return is 14%. Calculate the firm's before-tax cost of capital.
A firm has the following capital structure: 100 million shares outstanding, trading at £1.5 per share, and £100 million of debt. The beta of the firm’s stock is 1.5. The firm’s cost of equity is 10 percent, and the yield on riskless bonds is 2.5 percent. There is no tax. Assuming that the firm can borrow at the risk free rate and that both CAPM (Capital Asset Pricing Model) and the Modigliani-Miller theorem hold, answer the following questions. i) What...
You have collected the following information on Watson Company:· Watson has just paid a dividend of $3 and has expected dividend growth of 4.8% per year· Watson has a $20 million debt issue outstanding ($1000 par) with a 6% coupon rate. The debt has semi annual coupons and matures in five years. The bonds are selling at 95% of par· The company has a 40% tax rate· Watson also has 500,000 preferred shares outstanding. They are trading at $65 per...
Consider Higgins Production which has the following information about its capital structures: Debt - 4,500, 5% coupon bonds outstanding, $1,000 par value, 7 years to maturity, selling for 80 % of par, the bonds make semiannual payments • Common Stock - 100,000 shares outstanding, selling for $35 per share; the beta is 1.20 • Preferred Stock - 19,000 shares of 6 % preferred stock outstanding, currently selling for $150 per share • Market Information - 6 %t market risk premium...