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Author Question: Use the data provided on Cadbury to answer the question below. The risk free rate is 4.25%. The ... (Read 38 times)

SGallaher96

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Question 1

The proportions of the market value of the firm's assets financed via debt, common stock, and preferred stock are called the firm's
◦ financing costs.
◦ beta coefficients.
◦ capital structure weights.
◦ costs of capital.
◦ portfolio weights.

Question 2

Use the data provided on Cadbury to answer the question below. The risk free rate is 4.25%. The expected return on the market portfolio is 9.75%. The corporate tax rate is 40%. The face value of Cadbury's outstanding bonds is 2.450 billion pounds sterling. The coupon rate on Cadbury's bonds is 4.5%. Assume that the bonds pay annual coupons. The yield to maturity on Cadbury's bonds is 4.5%. Cadbury's bonds mature in 7 years. Cadbury has 1.650 billion common shares outstanding. The market price of Cadbury's common shares as of Dec 31, 2008 is 6.25 pounds sterling. Cadbury's Beta is 0.8. What is the market value of Cadbury's bonds?
◦ £0.13B
◦ £1.65B
◦ £1.80B
◦ £2.45B
◦ £2.49B


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Marked as best answer by SGallaher96 on Apr 25, 2021

jliusyl

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SGallaher96

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Reply 2 on: Apr 25, 2021
Excellent


nathang24

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Reply 3 on: Yesterday
YES! Correct, THANKS for helping me on my review

 

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