Company XXX has a marginal tax rate of 40%. The firm may issue new bonds at par
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Question:
Company XXX has a marginal tax rate of 40%.
The firm may issue new bonds at par that would provide a YTM of 8.5%.
The firm's beta is 0.7, the treasury bill rate is 5%, and the market return is 12%.
The company's long-term debt is currently selling at face value of $3,000.
The company has 100 shares of common stock outstanding that are selling for $10 per share.
Based on the information above:
1) What is XXX's capital structure based on market weights?
2) What is the firm's weighted average cost of capital?
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