Xena Corp.Total Assets$21,249Interest-Bearing Debt (market value)$11,070Average borrowing rate for debt10.20%Common Equity: Book Value$5,535Market Value$23,247Marginal Income Tax Rate19%Market Beta1.64 Using the information from the table, and assuming that the risk-free rate is 4.5% and the market risk premium is 6.2%, calculate Xena's weighted-average cost of capital:

Weighted Average Cost of Capital refers to the financial ratio that calculates the overall cost of…

Answered: Xena Corp. Total Assets $21,249…

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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Find the debt-to-value ratio for a firm with a debt-to-equity ratio of 4½.
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Calculate the cost of capital for a bond whose yield to maturity is 10% and the firm's tax rate of 34% a. 34% b. 10% c. 11% d. 6.6%
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1 2 Debt Ratio (current) 3 Equity Ratio (current) 4 Cost of Debt 5 Market Risk Premium 6 Equity Beta 7 Debt Beta 8 Risk Free Rate 9 Corporate Tax Rate 10 11 12 a. Cost of Equity 13 b. WACC 14 c. 15 Unlvered beta 16 Debt to Equity Ratio 17 Debt to Equity Beta 18 Cost of Equity 19 Debt to Ratio Given 20 Equity Ratio 21 Revised WACC 22 Solution 30.00% 70.00% 6.00% 5.25% 1.20% 0.29 4.50% 35.00% 40%
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Xena Corp.
Total Assets	$21,249
Interest-Bearing Debt (market value)	$11,070
Average borrowing rate for debt	10.20%
Common Equity:
Book Value	$5,535
Market Value	$23,247
Marginal Income Tax Rate	19%
Market Beta	1.64



Using the information from the table, and assuming that the risk-free rate is 4.5% and the market risk premium is 6.2%, calculate Xena's weighted-average cost of capital: