Deep Mines has 14 million shares of common stock outstanding with a beta of 1.15 and a market price of $42 a share. There are 900,000 shares of 9% preferred stock outstanding valued at $80 a share. The 10% semiannual bonds have a face value of $1,000 and are selling at 91% of par. There are 220,000 bonds outstanding that mature in 17 years. The market risk premium is 11.5%, T-bills are yielding 7.5%, and the firm's tax rate is 32%. What rate should the firm apply to project cash flows if the risk is the same as the firm's in decimal form (round to the nearest thousandth)?
Deep Mines has 14 million shares of common stock outstanding with a beta of 1.15 and a market price of $42 a share. There are 900,000 shares of 9% preferred stock outstanding valued at $80 a share. The 10% semiannual bonds have a face value of $1,000 and are selling at 91% of par. There are 220,000 bonds outstanding that mature in 17 years. The market risk premium is 11.5%, T-bills are yielding 7.5%, and the firm's tax rate is 32%. What rate should the firm apply to project cash flows if the risk is the same as the firm's in decimal form (round to the nearest thousandth)?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Deep Mines has 14 million shares of common stock outstanding with a beta of 1.15 and a market price of $42 a share. There are 900,000 shares of 9%
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