A firm has 10,000,000 shares of common stock outstanding, each with a market price of $15 per share. It has 80,000 bonds outstanding, each selling for $1020. The bonds mature in 15 years, have a coupon rate of 9 %, and pay coupons semi- annually. The firm's equity has a beta of 1.9, and the expected market return is 10%. The tax rate is 30% and the risk free rate is 4%. What is the cost of equity ? A) 11.4% B) 12.5% C) 13.7 % D 15.4% E) 23.0%
Debenture Valuation
A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.
Note Valuation
It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:
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