Bryan Corporation has debt with market value of $100 million, common equity with a book value...

 

Transcribed Image Text:

Bryan Corporation has debt with market value of $100 million, common equity with a book value of $100 million, and preferred stock with $20 million outstanding. Its common equity trades at $50 per share, and the firm has 6 million shares outstanding. What weights should Bryan Corporation use in its WACC? Problem 2 (8 marks) Willis Corp has a $10 million debt issue outstanding, with a 6% coupon rate. The debt has semi-annual coupons, the next coupon is due in six months, and the debt matures in five years. It is currently priced at 95% of par value. Assume the par value per bond is $1000. a) What is Willis's pre-tax cost of debt? b) If Willis faces a 40% tax rate, what is its after tax cost of debt? Bryan Corporation has debt with market value of $100 million, common equity with a book value of $100 million, and preferred stock with $20 million outstanding. Its common equity trades at $50 per share, and the firm has 6 million shares outstanding. What weights should Bryan Corporation use in its WACC? Problem 2 (8 marks) Willis Corp has a $10 million debt issue outstanding, with a 6% coupon rate. The debt has semi-annual coupons, the next coupon is due in six months, and the debt matures in five years. It is currently priced at 95% of par value. Assume the par value per bond is $1000. a) What is Willis's pre-tax cost of debt? b) If Willis faces a 40% tax rate, what is its after tax cost of debt?