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What are hala inc capital structure weights

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Reference no: EM132820077

Hala Inc. has 16,000,000 shares of common stock outstanding. The current share price is $55.00 and the book value per share is $6.00.

The total bond issue has a par value of $165 million, a 6.5% coupon rate, sells for 107 of par (hint: this is equivalent to $1070 each bond), and matures in 20 years.

Each bond issue pays interest semiannually.

Hala has a tax rate of 40%. Hala Inc has a beta of 1.75. The risk free rate is 2.50% and the return on the market is 12%.

a) What are Hala Inc's capital structure weights (the weight of debt & the weight of equity) on a book value basis? (hint: we assume that the book value of each bond is $1000)

b) What are Hala Inc's capital structure weights on a market value basis?

c) What is Hala Inc's cost of equity?

d) What is Hala Inc's after tax cost of debt?

e) What is Hala Inc's WACC? (hint: using the market value for calculating weight)

Reference no: EM132820077

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