The Bold and Beautiful company has 5 million shares outstanding, now trading at 30 per share....

 

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"The Bold and Beautiful" company has 5 million shares outstanding, now trading at £30 per share. The firm has estimated the expected rate of return to equity at 8%. It has also issued long-term debt securities at an interest rate of 6%. Assume that this firm has issued a £100 million bond. What is firm's WACC? [3.5 marks] If the firm pays tax at a marginal rate of 30%, what is its after-tax WACC? a. b. C. [3.5 marks] Briefly discuss the Modigliani-Miller propositions with regard to capital structure. Under what conditions do they hold? [5.5 marks] "The Bold and Beautiful" company has 5 million shares outstanding, now trading at £30 per share. The firm has estimated the expected rate of return to equity at 8%. It has also issued long-term debt securities at an interest rate of 6%. Assume that this firm has issued a £100 million bond. What is firm's WACC? [3.5 marks] If the firm pays tax at a marginal rate of 30%, what is its after-tax WACC? a. b. C. [3.5 marks] Briefly discuss the Modigliani-Miller propositions with regard to capital structure. Under what conditions do they hold? [5.5 marks]

Answer rating: 100% (QA)

Value of equity Number of share x price of share 5 x 30 150 million Value of bond100 milli... View the full answer