2. ABC Corporation has 10 million shares of common stock with book value per share of...

 

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2. ABC Corporation has 10 million shares of common stock with book value per share of $10 and market value per share of $30. The current beta of the stock is 1.5. Return on Treasury Bill is 3% (risk-free rate) and the market expected return is 11%. The company also has $100 million face value of outstanding debt with a coupon of 10% and a yield to maturity of 8% with 5 years to maturity. The company is in the 40% tax bracket. 1) What is the cost of debt of ABC Corporation and the after -tax cost of debt? 2)What is the cost of equity of ABC Corporation? 3) What is market value of debt? 4) What is the market value of equity? 5) What is the company's after-tax WACC? (+) 2. ABC Corporation has 10 million shares of common stock with book value per share of $10 and market value per share of $30. The current beta of the stock is 1.5. Return on Treasury Bill is 3% (risk-free rate) and the market expected return is 11%. The company also has $100 million face value of outstanding debt with a coupon of 10% and a yield to maturity of 8% with 5 years to maturity. The company is in the 40% tax bracket. 1) What is the cost of debt of ABC Corporation and the after -tax cost of debt? 2)What is the cost of equity of ABC Corporation? 3) What is market value of debt? 4) What is the market value of equity? 5) What is the company's after-tax WACC? (+)

Answer rating: 100% (QA)

To calculate the aftertax WACC lets first answer the questions step by step 1 Cost of Debt and After... View the full answer