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# 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
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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Answers Homework Chpt 12 - \$75,000,000 93 Market value>...

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