Bonds: The company issued 240,000 bonds. The bonds have a $1,000 face value with 7.5% coupons with annual payments, 20 years to maturity, and currently sell for $940. The marginal tax rate is 40%.
Equity: The company has 9,000,000 shares of (common) stock outstanding, selling for $71 per share. The companyâ€™s beta is 1.2, the risk free rate is 1%, and the market risk premium is 10%.
1. What is the total market value of this firm?
2. What percent of the companyâ€™s financing is debt?
3. What percent of the companyâ€™s financing is equity?
4a. What is the after-tax cost of debt?
4b. What is the cost of equity?
5. What is the companyâ€™s weighted average cost of capital?