Levy's company 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. Calculate the following if the company has a tax rate of 36 percent: Total Market Value for the Firm , After-tax cost of Debt, Cost of Equity , Cost of Preferred Stock, Weighted Average Cost of Capital. Please note that the total market value, After-tax cost of Debt, Cost of Equity and Cost of Preferred Stock should all be calculated in dollar value and NOT percentages. do not use excel formulas. show all workings

Levy's company 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. Calculate the following if the company has a tax rate of 36 percent: Total Market Value for the Firm , After-tax cost of Debt, Cost of Equity , Cost of Preferred Stock, Weighted Average Cost of Capital. Please note that the total market value, After-tax cost of Debt, Cost of Equity and Cost of Preferred Stock should all be calculated in dollar value and NOT percentages. do not use excel formulas. show all workings

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter12: The Cost Of Capital

Section: Chapter Questions

Problem 17P

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Question

Levy's company 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.

Calculate the following if the company has a tax rate of 36 percent:

Total Market Value for the Firm , After-tax cost of Debt, Cost of Equity , Cost of Preferred Stock, Weighted Average Cost of Capital.

Please note that the total market value, After-tax cost of Debt, Cost of Equity and Cost of Preferred Stock should all be calculated in dollar value and NOT percentages.

do not use excel formulas. show all workings

Definition Definition Amount of return a company generally pays to its equity investors. The cost of equity represents the compensation required by the market in lieu of owning the asset firm and simultaneously bearing the risk of ownership.

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