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What is the company capital structure

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Reference no: EM133016540

Problem - Brook?eld Railway Ltd has 4 million shares outstanding with a current share price of $15, and the book value per share is $10. Brook?eld also has two bond issues outstanding. The ?rst bond issue has a face value of $20 million, a coupon rate of 5.0%, a yield to maturity of 5.4% and sells for 97% of par. The second issue has a face value of $30 million, a coupon rate of 5.5%, a yield to maturity of 5.0% and sells for 102% of par. The ?rst issue matures in 10 years, While the second in 5 years. Assume the cost of equity is 12% and a tax rate of 30%.

Required -

a. What is the company's capital structure?

b. What is the company's WACC? The overall cost of debt is the weighted average of the two outstanding bonds.

Reference no: EM133016540

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