Consider Higgins Production which has the following information about its capital stru bt - 1,500, 5 percent coupon bonds outstanding, $1,000 par value, 7 years to maturity, percent of par, the bonds make semi-annual payments Common Stock - 100,000 shares outstanding, selling for $45 per share; the beta is 0.8 Preferred Stock - 25,000 shares of 6 percent preferred stock outstanding, currently se $150 per share Market Information - 6 percent market risk premium and 4 percent risk-free rate. quired: Calculate the following if the company has a tax rate of 36 percent. Total Market Value for the Firm After-tax cost of Debt
Consider Higgins Production which has the following information about its capital stru bt - 1,500, 5 percent coupon bonds outstanding, $1,000 par value, 7 years to maturity, percent of par, the bonds make semi-annual payments Common Stock - 100,000 shares outstanding, selling for $45 per share; the beta is 0.8 Preferred Stock - 25,000 shares of 6 percent preferred stock outstanding, currently se $150 per share Market Information - 6 percent market risk premium and 4 percent risk-free rate. quired: Calculate the following if the company has a tax rate of 36 percent. Total Market Value for the Firm After-tax cost of Debt
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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![2. Consider Higgins Production which has the following information about its capital structures:
Debt - 1,500, 5 percent coupon bonds outstanding, $1,000 par value, 7 years to maturity, selling for
80 percent of par, the bonds make semi-annual payments
Common Stock - 100,000 shares outstanding, selling for $45 per share; the beta is 0.80
Preferred Stock - 25,000 shares of 6 percent preferred stock outstanding, currently selling for
$150 per share
Market Information - 6 percent market risk premium and 4 percent risk-free rate.
Required: Calculate the following if the company has a tax rate of 36|
ent.
į.
Total Market Value for the Firm
ii.
After-tax cost of Debt
ii.
Cost of Equity
iv.
Cost of Preferred Stock
|v.
Weighted Average Cost of Capital](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0a4a0bce-2dfb-4c66-b655-11a60bcce410%2F884729e3-e698-4082-a7da-a4eda476924f%2Frv49ue_processed.png&w=3840&q=75)
Transcribed Image Text:2. Consider Higgins Production which has the following information about its capital structures:
Debt - 1,500, 5 percent coupon bonds outstanding, $1,000 par value, 7 years to maturity, selling for
80 percent of par, the bonds make semi-annual payments
Common Stock - 100,000 shares outstanding, selling for $45 per share; the beta is 0.80
Preferred Stock - 25,000 shares of 6 percent preferred stock outstanding, currently selling for
$150 per share
Market Information - 6 percent market risk premium and 4 percent risk-free rate.
Required: Calculate the following if the company has a tax rate of 36|
ent.
į.
Total Market Value for the Firm
ii.
After-tax cost of Debt
ii.
Cost of Equity
iv.
Cost of Preferred Stock
|v.
Weighted Average Cost of Capital
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