( WACC) Margo Corporation is a major producer of lawn care products. Its stock currently sells for $24 per share; there are 10.5 million shares outstanding. It has debt with a book value of $400 million. Margo bonds yield 45% and trade at 100% of face value. Bonds mature in 10 years. The risk-free rate is 8%, the market risk premium is 9% and Margo has a beta equal to 1. The tax rate is 26.6%. The WACC is %.
( WACC) Margo Corporation is a major producer of lawn care products. Its stock currently sells for $24 per share; there are 10.5 million shares outstanding. It has debt with a book value of $400 million. Margo bonds yield 45% and trade at 100% of face value. Bonds mature in 10 years. The risk-free rate is 8%, the market risk premium is 9% and Margo has a beta equal to 1. The tax rate is 26.6%. The WACC is %.
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:( WACC) Margo Corporation is a major producer
of lawn care products. Its stock currently sells
for $24 per share; there are 10.5 million shares
outstanding. It has debt with a book value
of $400 million. Margo bonds yield 45% and
trade at 100% of face value. Bonds mature in 10
years. The risk-free rate is 8%, the market risk
premium is 9% and Margo has a beta equal to
1. The tax rate is 26.6%. The WACC is
%.
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