Patilya Pata Food is interested in calculating its weighted average cost of capital. The company's CFO has collected the following information: ● The target capital structure consists of 40% debt and 60% common stock • The company has a 20-year noncallable bonds with a par value of P1,000, a 9% annual coupon, and is selling now at 92-1/4. • Equity flotation costs are 2% ● The company's common stock has a beta of 0.80 •The risk-free rate is 5%; and market risk premium is 4% The company's tax rate is 40% Show complete solution ●
Patilya Pata Food is interested in calculating its weighted average cost of capital. The company's CFO has collected the following information: ● The target capital structure consists of 40% debt and 60% common stock • The company has a 20-year noncallable bonds with a par value of P1,000, a 9% annual coupon, and is selling now at 92-1/4. • Equity flotation costs are 2% ● The company's common stock has a beta of 0.80 •The risk-free rate is 5%; and market risk premium is 4% The company's tax rate is 40% Show complete solution ●
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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Transcribed Image Text:Patilya Pata Food is interested in calculating its weighted average cost of
capital.
The company's CFO has collected the following information:
●
The target capital structure consists of 40% debt and 60% common stock
• The company has a 20-year noncallable bonds with a par value of P1,000,
a 9% annual coupon, and is selling now at 92-1/4.
Equity flotation costs are 2%
• The company's common stock has a beta of 0.80
•The risk-free rate is 5%; and market risk premium is 4%
The company's tax rate is 40%
Show complete solution
●
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