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What is the market value of the debt

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Reference no: EM133061712

Consider the following company,

Book Value of Debt

$50 million

YTM

10%

Coupon

7%

Coupon Payments

semi-annually

Years

20

Corporate Tax Rate

33%

# of Preferred Shares

2 million

Price of Preferred Share

$25

Dividend per Preferred Shares

$1.33

# of Common Shares

9.5 million

Price of Common Share

$19

β  of Common Stock

1.3

Risk-Free Rate

4%

Market Return

10%

a. What is the market value of the debt? Enter your answer in terms of millions and rounded to 2 DECIMAL PLACES.

b. What is the rate of return on the preferred stock? Enter you answer as a percentage and rounded to 2 DECIMAL PLACES. Do not include the percentage sign in your answers.

c. What is the market value of the preferred stock? Enter your answer in terms of millions.

Reference no: EM133061712

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