XYZ Corp. has 600,000 bonds outstanding. Each bond sells for $872.16 in the market. The bonds are zero-coupon bonds with 4 years to maturity and a face value of $1,000. XYZ has 26,000,000 shares of common equity outstanding. Each share is worth $37.50. The equity of XYZ Corp. has a beta of 1.3. XYZ Corp. has a marginal tax rate of 18%. The risk-free rate is 1% and the return on the market is expected to be 9%. Calculate the cost of debt (before tax), the cost of equity, and the WACC for XYZ Corp.
XYZ Corp. has 600,000 bonds outstanding. Each bond sells for $872.16 in the market. The bonds are zero-coupon bonds with 4 years to maturity and a face value of $1,000. XYZ has 26,000,000 shares of common equity outstanding. Each share is worth $37.50. The equity of XYZ Corp. has a beta of 1.3. XYZ Corp. has a marginal tax rate of 18%. The risk-free rate is 1% and the return on the market is expected to be 9%. Calculate the cost of debt (before tax), the cost of equity, and the WACC for XYZ Corp.
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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XYZ Corp. has 600,000 bonds outstanding. Each bond sells for $872.16 in the market. The bonds are zero-coupon bonds with 4 years to maturity and a face value of $1,000. XYZ has 26,000,000 shares of common equity outstanding. Each share is worth $37.50. The equity of XYZ Corp. has a beta of 1.3. XYZ Corp. has a marginal tax rate of 18%. The risk-free rate is 1% and the return on the market is expected to be 9%. Calculate the cost of debt (before tax), the
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