Union Pacific Railroad reported net income of $770 million after interest expenses of $320 million in a recent financial year (The corporate tax rate was 36%). It reported depreciation of $960 million in that year, and capital spending was Ghc1.2 billion. The firm also had $4 billion in debt outstanding on the books, was rated AA (carrying a yield to maturity of 8%), and was trading at par (up from $3.8 billion at the end of the previous year). The beta of the stock is 1.05, and there were 200 million shares outstanding (trading at $60 per share), with a book value of $5 billion. Union Pacific paid 40% of its earnings as dividends and working capital requirements are negligible. (The Treasury bond rate is 7%). You can assume a market risk premium of 5.5%. 1.calculate the weight of debt to total capital 2. Calculate the weight of equity to total capital
Union Pacific Railroad reported net income of $770 million after interest expenses of $320 million in a recent financial year (The corporate tax rate was 36%). It reported
1.calculate the weight of debt to total capital
2. Calculate the weight of equity to total capital
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