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
Related questions
Question
Transcribed Image Text:IBL Ltd went public by 5 million shares of common stock of $65 per share. The shares are
currently trading at $100 per share. IBL Ltd has equity beta of 1.55. The risk- free rate of
return is 7.5% per year and the equity risk premium is 10% per year. IBL Ltd pays a
corporation tax at an annual rate of 15% per year. During last year, it issued 200 000 bonds
of $1000 par paying 10% annually maturing in 15 years. The bonds are currently trading at
$700.
Required:
Calculate the market value weighted average cost of capital of IBL Ltd Calculate
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