Answers Homework Chpt 12

Answers Homework Chpt 12 - $75,000,000 93% Market value...

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Years to Maturity 12 Price 105 Coupon 8% --> Payments = 100 * 8% =$8 Tax Rate 35% Year 0 1 2 3 4 5 6 Cash Flow -105 8 8 8 8 8 8 Using IRR to find discount rate which is the YTM IRR = 7.3584% Therefore YTM = 7.3584% Pre-Tax The Aftertax cost of debt is the YTM * (1- tc) 0.05 or 4.78%
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7 8 9 10 11 12 8 8 8 8 8 108
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Share outstanding 9,500,000 a. Book Share Price = $5 Equity book value = book share price * shares outstanding = Bond Face Values $75,000,000 $60,000,000 Total bond value Total value $47,500,000 / $182,500,000 = 0.26 Equity $135,000,000 / $182,500,000 = 0.74 Debt b. Share Price $53 Market Value of share = Bond Face Values % of Par
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Unformatted text preview: $75,000,000 93% Market value --> $60,000,000 96.50% Market value --> Total value --> $503,500,000 / $631,150,000 = 0.8 Equity $127,650,000 / $631,150,000 = 0.2 Debt c. The market value rates would be more relevant. The market value of the e represents the current value of the company. This is the amount the compa receive if additional shares are sold. $47,500,000 $135,000,000 $182,500,000 <-- Book Value Weights $503,500,000 $69,750,000 $57,900,000 $631,150,000 quity more accurately any would most likely...
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This note was uploaded on 02/14/2011 for the course FINANCE 610 taught by Professor Siad during the Fall '09 term at UMBC.

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Answers Homework Chpt 12 - $75,000,000 93% Market value...

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