Firm yield to maturity on bonds

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1. Kokapeli, Inc. has a target capital structure of 40% debt and 60% common equity, and has a 40% marginal tax rate. If the firm's yield to maturity on bonds is 8.5% and investors require a 12% return on the firm's common stock, what is the firm's WACC?

2. A municipal bond has a YTM of 3.81 percent while the YTM of a comparable taxable bond is 5.11 percent. What is the tax rate that will make an investor indifferent between the municipal bond and the taxable bond.

Reference no: EM131980544

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