A company has a target capital structure of 40% debt and 60% equity. The company's bonds with
Fantastic news! We've Found the answer you've been seeking!
Question:
A company has a target capital structure of 40% debt and 60% equity. The company's bonds with face value of GH1000 pay a 10% coupon paid semiannually. This will mature in 20 years and sell for GH54 with a yield to maturity of 12%. The company's stock beta is 1.2, risk-free rate is 10% and market risk premium is 5%. As a constant growth firm with a growth rate of 8%, the company just paid a dividend of GH2 and its price per share is GH27. If the marginal tax rate charged to the company is 40%,
The company's cost of equity using CAPM is...
Posted Date: