Axel is a mining company. It has 50 bonds outstanding with a their par value of $1,000 each. Bonds with similar characteristics are yielding a pretax 10 per cent. Axel has 8,000 shares outstanding. The stock has a beta of 1.4 and sells for $50 a share. A treasury bills are yielding 3 per cent, the market risk premium is 4 per cent, and the firm's tax rate is 30 per cent. Calculate WACC assuming its earnings are sufficient to classify all interest as a tax-deductible expense
Axel is a mining company. It has 50 bonds outstanding with a their par value of $1,000 each. Bonds with similar characteristics are yielding a pretax 10 per cent. Axel has 8,000 shares outstanding. The stock has a beta of 1.4 and sells for $50 a share. A treasury bills are yielding 3 per cent, the market risk premium is 4 per cent, and the firm's tax rate is 30 per cent. Calculate WACC assuming its earnings are sufficient to classify all interest as a tax-deductible expense
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Axel is a mining company. It has 50 bonds outstanding with a their par value of $1,000 each. Bonds with similar characteristics are yielding a pretax 10 per cent. Axel has 8,000 shares outstanding. The stock has a beta of 1.4 and sells for $50 a share. A treasury bills are yielding 3 per cent, the market risk premium is 4 per cent, and the firm's tax rate is 30 per cent. Calculate WACC assuming its earnings are sufficient to classify all interest as a tax-deductible expense
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