Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. addisons equipment has 40,000 bonds outstanding th

Addisons Equipment has 40,000 bonds outstanding that are selling at 103% of par. These bonds...

70.2K

Verified Solution

Question

Finance

image

image

Addisons Equipment has 40,000 bonds outstanding that are selling at 103% of par. These bonds have a $1,000 face value. Bonds with similar characteristics are yielding 6 percent. The company also has 1.5 million shares of common stock outstanding. The common stock has a beta of 1.2 and sells for $53.31 a share. The U.S. Treasury bill is yielding 1 percent and the expected return on the market is 7 percent. The corporate tax rate is 40 percent. The WACC for Addisons is closest to Robins Equipment, a firm with identical assets and operation to Addisons Equipment (from two questions above) if financed exclusively with equity. Robins Equipment has a beta of 1.10. The U.S. Treasury bill is yielding 1% percent and the expected return on the market is 7% percent. The corporate tax rate is 40 percent. The cost of capital (WACC) for Robins Equipment is higher than that of Addisons Equipment True False

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students