Cafe Corp. has 550,000 shares outstanding and 7,000 coupon bonds. The shares are currently priced at $ 28.50 each and have a beta of 1.15. The firm's bonds have a coupon rate of 9.5% (paid semi-annually) and 5 years to maturity. The YTM on the bonds is currently 6.5%. The expected return on the S&P TX Composite Index is 6.20% and the risk-free rate is 75 basis points. Assume Cafe Corp.'s marginal tax rate is 15%. The firm's WACC is. . percent.

Cafe Corp. has 550,000 shares outstanding and 7,000 coupon bonds. The shares are currently priced at $ 28.50 each and have a beta of 1.15. The firm's bonds have a coupon rate of 9.5% (paid semi-annually) and 5 years to maturity. The YTM on the bonds is currently 6.5%. The expected return on the S&P TX Composite Index is 6.20% and the risk-free rate is 75 basis points. Assume Cafe Corp.'s marginal tax rate is 15%. The firm's WACC is. . percent.

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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