Second Rate Ballroom, Inc, a national convention planner has 1,500 common shares and 2,000 bonds outstanding. Its
Question:
Second Rate Ballroom, Inc, a national convention planner has 1,500 common shares and 2,000 bonds outstanding. Its securities have been performing very well in the marketplace. It has a common stock price of $35 per share, down from $35 a year ago. Its bonds have also not performed well, currently priced at $750 per bond, down from $1,100 a year ago. It stock has a beta coefficient of 3.5 and a market risk premium of 8.5%. The yield on 3D-year Treasury Bonds is 5.5%. First Rate Ballroom's bonds are rather typical for the industry having 30 year maturities, 10% coupon rates, and $1000 face values. What is the W ACC of Second Rate Ballroom? First Rate is in the 35% marginal tax rate?
Foundations of Financial Management
ISBN: 978-1259024979
10th Canadian edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta