Use the following information: Debt: $75,000,000 book value outstanding. The debt is trading at 90% of...

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Use the following information: Debt: $75,000,000 book value outstanding. The debt is trading at 90% of book value. The yield to maturity is 9% • Equity: 2,500,000 shares selling at $42 per share. Assume the expected rate of return on Federated's stock is 18% •Taxes: Federated's marginal tax rate is Te 0.21. Suppose Federated Junkyards decides to move to a more conservative debt policy. A year later, its debt ratio is down to 15% (D/V= 0.15). The interest rate has dropped to 8.6%. The company's business risk, opportunity cost of capital, and tax rate have not changed. Use the three-step procedure to calculate Federated's WACC under these new assumptions. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Weighted average cost of capital Use the following information: Debt: $75,000,000 book value outstanding. The debt is trading at 90% of book value. The yield to maturity is 9% • Equity: 2,500,000 shares selling at $42 per share. Assume the expected rate of return on Federated's stock is 18% •Taxes: Federated's marginal tax rate is Te 0.21. Suppose Federated Junkyards decides to move to a more conservative debt policy. A year later, its debt ratio is down to 15% (D/V= 0.15). The interest rate has dropped to 8.6%. The company's business risk, opportunity cost of capital, and tax rate have not changed. Use the three-step procedure to calculate Federated's WACC under these new assumptions. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Weighted average cost of capital

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Step 1 Calculate the cost of debt Kd Kd Yield to Maturity 1 Tax Rate K... View the full answer