Market value of debt and market value of the whole firm

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Company Inc has 15 million shares outstanding each selling at $22 per share. The market value of debt represents 30% of the firm’s capital structure and the yield to maturity on debt is 9%. The corporate tax rate is 30%.

a. What is the market value of equity, the market value of debt, and the market value of the whole firm?

b. Assume the leveraged firm’s cost of equity is 15%. What is the firm’s weighted average cost of capital (WACC)?

Reference no: EM131863773

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