You work in the finance department of Brom, Inc. The firm currently has a debt-to-asset ratio of 35%. The firm's outstanding debt is a single bond issue. These securities have a face value of $1,000, mature in 14 years, bear 5% (annual) coupons, and are currently trading at 95.205% of par. The firm's current beta is 0.65. It faces the statutory 21% marginal tax rate. The current return on T-Bonds is 4% and the long-term market risk premium is 7%, therefore the firm's cost of equity financing is 8.55%. What is Brom, Inc.'s weighted-average-cost-of-capital? (Round your answer to two decimal places, e.g. 4.75)
You work in the finance department of Brom, Inc. The firm currently has a debt-to-asset ratio of 35%. The firm's outstanding debt is a single bond issue. These securities have a face value of $1,000, mature in 14 years, bear 5% (annual) coupons, and are currently trading at 95.205% of par. The firm's current beta is 0.65. It faces the statutory 21% marginal tax rate. The current return on T-Bonds is 4% and the long-term market risk premium is 7%, therefore the firm's cost of equity financing is 8.55%. What is Brom, Inc.'s weighted-average-cost-of-capital? (Round your answer to two decimal places, e.g. 4.75)
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
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Transcribed Image Text:You work in the finance department of Brom, Inc. The firm currently has a
debt-to-asset ratio of 35%. The firm's outstanding debt is a single bond issue.
These securities have a face value of $1,000, mature in 14 years, bear 5%
(annual) coupons, and are currently trading at 95.205% of par. The firm's
current beta is 0.65. It faces the statutory 21% marginal tax rate. The current
return on T-Bonds is 4% and the long-term market risk premium is 7%,
therefore the firm's cost of equity financing is 8.55%.
What is Brom, Inc.'s weighted-average-cost-of-capital? (Round your answer to
two decimal places, e.g. 4.75)
Numeric Response
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