What is the total market value of equity? SFE Inc. has 1 million shares of common stock outstanding at a book value of $40 per share. The stock trades for $50 per share. It also has $10 million in face value of debt (corporate bonds of 5 years with coupon rate 10.4%, paid semi-annually) that trades at 110% of face value. The company's common stock has a beta of 1.2. Treasury bills yield 2% and the market return is 10%. The corporate tax rate is 35%.
What is the total market value of equity? SFE Inc. has 1 million shares of common stock outstanding at a book value of $40 per share. The stock trades for $50 per share. It also has $10 million in face value of debt (corporate bonds of 5 years with coupon rate 10.4%, paid semi-annually) that trades at 110% of face value. The company's common stock has a beta of 1.2. Treasury bills yield 2% and the market return is 10%. The corporate tax rate is 35%.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:What is the total market value of equity?
SFE Inc. has 1 million shares of common stock outstanding
at a book value of $40 per share. The stock trades for $50
per share. It also has $10 million in face value of debt
(corporate bonds of 5 years with coupon rate 10.4%, paid
semi-annually) that trades at 110% of face value. The
company's common stock has a beta of 1.2. Treasury bills
yield 2% and the market return is 10%. The corporate tax
rate is 35%.
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