Levy's company has the following information about its capital structures:  Debt - 1,500, 5 percent coupon bonds outstanding, $1,000 par value, 7 years to maturity, selling for 80 percent of par, the bonds make semi-annual payments Common Stock - 100,000 shares outstanding, selling for $45 per share; the beta is 0.80 Preferred Stock - 25,000 shares of 6 percent preferred stock outstanding, currently selling for $150 per share Market Information - 6 percent market risk premium and 4 percent risk-free rate. Calculate the following if the company has a tax rate of 36 percent: Total Market Value for the Firm , After-tax cost of Debt, Cost of Equity , Cost of Preferred Stock, Weighted Average Cost of Capital. Please note that the total market value, After-tax cost of Debt, Cost of Equity and Cost of Preferred Stock should all be calculated in dollar value and NOT percentages. do not use excel formulas. show all workings

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
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Levy's company has the following information about its capital structures:

 Debt - 1,500, 5 percent coupon bonds outstanding, $1,000 par value, 7 years to maturity, selling for 80 percent of par, the bonds make semi-annual payments

  • Common Stock - 100,000 shares outstanding, selling for $45 per share; the beta is 0.80
  • Preferred Stock - 25,000 shares of 6 percent preferred stock outstanding, currently selling for $150 per share
  • Market Information - 6 percent market risk premium and 4 percent risk-free rate.

Calculate the following if the company has a tax rate of 36 percent:

Total Market Value for the Firm , After-tax cost of Debt, Cost of Equity , Cost of Preferred Stock, Weighted Average Cost of Capital.

Please note that the total market value, After-tax cost of Debt, Cost of Equity and Cost of Preferred Stock should all be calculated in dollar value and NOT percentages.

do not use excel formulas. show all workings

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