Calculate the company market value cost of debt

Assignment Help Financial Management
Reference no: EM131552474

A company's book value of equity is $200 million, and its book value cost of equity is 24%. It has 2 million shares outstanding with a price per share of $125. Its beta is 1.35. The risk free rate is 2.50% and the return on the market is 18.25%. The company also has two bonds. The book value of bond 1 is $65 million and its coupon rate is 10%. The book value of bond 2 is $35 million and its coupon rate is 12%. The current yield to maturity for bond 1 is 9% and the current yield to maturity for bond 2 is 13%. Bond 1's price is $1,025 and bond 2's price is $960. The company's tax rate is 35%.

Calculate the company's market value cost of debt.

Reference no: EM131552474

Questions Cloud

Were the four main themes the important in modern world : Were the four main themes the most important in modern world history? What other themes would you include?
Which partys stance on the issue you selected is closest : Which party's stance on the issue you selected is closest to your own? Which is the furthest from your ideals? Why.
What is the magnitude of electric field : How much twist in the fiber will be needed to make the angle between the two lines from the fiber to the two charges become 0.1 radians, as shown in Fig. 6.7?
Write an equation in point-slope form to find the total : Write an equation in point-slope form to find the total price y for any number of number of months x. Write the equation in slope intercept form.     What is the setup fee?
Calculate the company market value cost of debt : A company's book value of equity is $200 million, and its book value cost of equity is 24%. Calculate the company's market value cost of debt.
What is the amount of company accounts receivable : What is the amount of the company’s accounts receivable?
Compose a discussion board thread that mimics a first-person : You will now pretend to be Michelangelo and compose a discussion board thread that mimics a first-person journal entry.
Create a disbursement float or collection float : Does this create a disbursement float or a collection float? What is your available balance?
Provide a thesis statement for the paper : Provide a thesis statement for the final paper. It is very important that the statement focuses on the final appear and not the topic discussed above.

Reviews

Write a Review

Financial Management Questions & Answers

  What was the firms operating income or ebit

Liquid Metals recently reported $150,000 of sales, $60,000 cost of goods sold, and $35,000 of depreciation. It has outstanding $400,000 of bonds that carry a 6.3% interest rate, and its federal-plus-state income tax rate was 40%. What was the firm's ..

  Question 1 american standard co has a 90 day pound1 million

question 1 american standard co. has a 90 day pound1 million receivable. american standards bank bank of america

  Investors profit with the stock price at maturity of option

Apple call options strike $330.00 is trading at $127.50 today. Under what circumstances does the investor make a profit? Under what circumstances will the option be exercised? Draw a diagram showing the variation of the investors profit with the stoc..

  What are casa de diseno existing operating cycle

Assming a constant rate of purchases, production, and sales throughout the year, - what are casa de diseno existing operating cycle, cash conversion cycle and resource investment need.

  True regarding investment banks

Which of the following is true regarding Investment Banks? When Glass-Steagal was repealed in 1999, commercial banks and Investment banks had to be separate entities.

  Same market value and duration as your liabilities

You want to immunize your position by constructing a portfolio of two assets below that has the same market value and duration as your liabilities.

  What is the projects average accounting return

what is the project’s average accounting return (AAR)?

  Prepare a horizontal common size analysis for the net sales

Using 2008 as the base, prepare a horizontal common-size analysis for the Net sales and Assets.- Comment on each of the horizontal common-size in (a).

  Marketers attempt to increase the percent of industry sales

If marketers attempt to increase the percent of industry sales their product will attract, they are using:

  Two different salary arrangements

You've just joined the investment banking firm of Dewey, Cheatum, and Howe. They've offered you two different salary arrangements.

  How many shares does it have after the recapitalization

AAon raised $250M in new debt to repurchase stock. After the recapitalization, AAon’s stock price is $10.00. If AAon had 80 million shares of stock before the recapitalization, how many shares does it have after the recapitalization?

  What is the effective annual interest rate for an asset

What is the Effective Annual Interest Rate for an asset that is purchased on December 15, 2015 for $875 and sold 27 months later (on March 15, 2018) for $1,099? A bond pays interest on a semi-annual basis and has a coupon rate of 9%. The interest is ..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd