You have the following information about Burgundy Basins, a sink manufacturer. Equity shares outstanding 20,000,000 Stock price per share 40 Yield to maturity on debt 7.50% Book value of interest-bearing debt 320,000,000 Coupon interest rate on de
You have the following information about Burgundy Basins, a sink manufacturer. Equity shares outstanding 20,000,000 Stock price per share 40 Yield to maturity on debt 7.50% Book value of interest-bearing debt 320,000,000 Coupon interest rate on de
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
| You have the following information about Burgundy Basins, a sink manufacturer. | ||||||||||||||
| Equity shares outstanding | 20,000,000 | |||||||||||||
| Stock price per share | 40 | |||||||||||||
| Yield to maturity on debt | 7.50% | |||||||||||||
| Book value of interest-bearing debt | 320,000,000 | |||||||||||||
| Coupon interest rate on debt | 4.80% | |||||||||||||
| Market value of debt | 290,000,000 | |||||||||||||
| Book value of equity | 500,000,000 | |||||||||||||
| 14% | ||||||||||||||
| Tax rate | 35% | |||||||||||||
| Burgundy is contemplating what for the company is an average-risk investment costing $40 million and promising an annual ATCF of $6.4 million in | ||||||||||||||
| perpetuity. |
| b. | What is Burgundy's weighted-average cost of capital? |
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