Santa Claus Enterprises has 174,000 shares of common stock outstanding at a current price of $46 a share. The firm also has two bond issues outstanding. The first bond issue has a total face value of $250,000, pays 7.7 percent interest annually, and currently sells for 102.5 percent of face value. The second bond issue consists of 5,000 bonds that are selling for $993 each. These bonds pay 6.5 percent interest annually and mature in eight years. The tax rate is 34 percent. What is the capital structure weight of the firm's debt? A. 60.52% B. 51.39% C. 55.50% D. 39.48%

Santa Claus Enterprises has 174,000 shares of common stock outstanding at a current price of $46 a share. The firm also has two bond issues outstanding. The first bond issue has a total face value of $250,000, pays 7.7 percent interest annually, and currently sells for 102.5 percent of face value. The second bond issue consists of 5,000 bonds that are selling for $993 each. These bonds pay 6.5 percent interest annually and mature in eight years. The tax rate is 34 percent. What is the capital structure weight of the firm's debt? A. 60.52% B. 51.39% C. 55.50% D. 39.48%

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter20: Hybrid Financing: Preferred Stock, Warrants, And Convertibles

Section: Chapter Questions

Problem 1P: Neubert Enterprises recently issued $1,000 par value 15-year bonds with a 5% coupon paid annually...

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Santa Claus Enterprises has 174,000 shares of common stock outstanding at a current price of $46 a share. The firm also has two bond issues outstanding. The first bond issue has a total face value of $250,000, pays 7.7 percent interest annually, and currently sells for 102.5 percent of face value. The second bond issue consists of 5,000 bonds that are selling for $993 each. These bonds pay 6.5 percent interest annually and mature in eight years. The tax rate is 34 percent. What is the capital structure weight of the firm's debt?
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