Use the following information: Debt: $ 7 5 , 0 0 0 , 0 0 0 book
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Question:
Use the following information:
Debt: $ book value outstanding. The debt is trading at of book value. The yield to maturity is
Equity: shares selling at $ per share. Assume the expected rate of return on Federateds stock is
Taxes: Federateds marginal tax rate is Tc
Suppose Federated Junkyards decides to move to a more conservative debt policy. A year later, its debt ratio is down to DV The pretax cost of debt has dropped to The companys business risk, opportunity cost of capital, and tax rate have not changed.
Use the threestep procedure to calculate Federateds WACC under these new assumptions.
Note: Do not round intermediate calculations. Enter your answer as a percent rounded to decimal places.
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