Blues Cruises issues only common stock and fixed-coupon bonds. Blues has 850,000 shares outstanding with a market price of $3.70 per share at a current cost of 11.25 percent (according to the SML) and $2 million par value of bond outstanding that currently trade at 98% of par at a pretax cost of 6.25 percent. The firm's tax rate is 28 percent? What is the capital structure weight of the firm's equity?

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
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Blues Cruises issues only common stock and fixed-coupon bonds. Blues has 850,000 shares
outstanding with a market price of $3.70 per share at a current cost of 11.25 percent (according to
the SML) and $2 million par value of bond outstanding that currently trade at 98% of par at a
pretax cost of 6.25 percent. The firm's tax rate is 28 percent? What is the capital structure weight
of the firm's equity?
Transcribed Image Text:Blues Cruises issues only common stock and fixed-coupon bonds. Blues has 850,000 shares outstanding with a market price of $3.70 per share at a current cost of 11.25 percent (according to the SML) and $2 million par value of bond outstanding that currently trade at 98% of par at a pretax cost of 6.25 percent. The firm's tax rate is 28 percent? What is the capital structure weight of the firm's equity?
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