Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Transcribed Image Text:7. ABC Corp has 1.4 million shares common valued at $20 per share =$28 million. Debt has face value of
$5 million and trades at 93% of face ($4.65 million) in the market.
Total market value of both equity + debt thus =$32.65 million. Equity % = .8576 and Debt % = .1424
Risk free rate is 4%, risk premium-7% and ABC's ß=.74
Current yield on market debt is 11%; Tax rate is 40% .
Find out the Returm on equity, Return on debt and WACC.
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