Author Question: Initech has 7 million shares of common stock outstanding and 50,000 bonds outstanding. The bonds pay ... (Read 127 times)

jilianpiloj · **on:** Apr 25, 2021

Initech has 7 million shares of common stock outstanding and 50,000 bonds outstanding. The bonds pay semi-annual coupons at an annual rate of 9.05%, have 6 years to maturity and a face value of $1,000 each. The common stock currently sells for $30 a share and has a beta of 1. The bonds sell for 94% of face value and have a 10.42% yield to maturity. The market risk premium is 5.5%, T-bills are yielding 5% and the tax rate is 30%. What is the firm's capital structure weight for debt?
◦ 18.3%
◦ 19.3%
◦ 20.3%
◦ 21.3%
◦ 22.3%

chevyboi1976 · **Reply #1 on:** Apr 25, 2021

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