Problem

Binomial Tree Farm’s financing includes $5 million of bank loans. Its common equity is sho...

Binomial Tree Farm’s financing includes $5 million of bank loans. Its common equity is shown in Binomial’s Annual Report at $6.67 million. It has 500,000 shares of common stock outstanding, which trade on the Wichita Stock Exchange at $18 per share. What debt ratio should Binomial use to calculate its WACC or asset beta? Explain.

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Solutions For Problems in Chapter 9