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Eagle Construction Co, is a successful privately-held firm owned by Marquette alumni. - It has $200 million bonds outstanding due in ten years with a 7% coupon paid semi-annually. They are valued at 110% of par value. - The company also has 25 million shares of common stock outstanding among the partners. The stock book value is $2/ share and is valued at $11/ share. - A survey of publicly-held firms in their industry estimates a beta of 1.1 . - The risk-free rate is 4.5% and the market equity return is 9.5% and add an additional 3% to adjust for their small size. - Eagle's tax rate is 21%. Step One: - Calculate the (pre-tax) yield-to-maturity of the bonds - Calculate the (after-tax) yield-to-maturity of the bonds Step Two: - Calculate the equity cost Step Three: - Calculate the debt and equity mix (\%) Debt Equity