Aligram Software Ltd has five million shares outstanding and its market price is $61 per share....

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Aligram Software Ltd has five million shares outstanding and itsmarket price is $61 per share. The company has only two bondsoutstanding. Bond A is a 15-year bond issued four years ago, whichhas a face value of $100 million and a coupon rate of 5%, and isselling for 95% of the par value. Bond B is a five-year bond issuedone year ago, which has a face value of $60 million and a couponrate of 6.5%, and is sel ling for 103% of the par value. Both bondspay coupon semiannually.
a What are the company’s capital structure weights (both equityand debt) on a market value basis?
b If the cost of equity is 11%, and the tax rate is 15%, what isthe company’s Weighted Average Cost of Capital (WACC)?

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a MV of equityPrice of equitynumber of shares outstanding MV of equity615000000 305000000 MV of Bond1Par valuebonds outstandingage of par MV of Bond11000100000095 95000000 MV of Bond2Par valuebonds outstandingage of par MV See Answer

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Aligram Software Ltd has five million shares outstanding and itsmarket price is $61 per share. The company has only two bondsoutstanding. Bond A is a 15-year bond issued four years ago, whichhas a face value of $100 million and a coupon rate of 5%, and isselling for 95% of the par value. Bond B is a five-year bond issuedone year ago, which has a face value of $60 million and a couponrate of 6.5%, and is sel ling for 103% of the par value. Both bondspay coupon semiannually.a What are the company’s capital structure weights (both equityand debt) on a market value basis?b If the cost of equity is 11%, and the tax rate is 15%, what isthe company’s Weighted Average Cost of Capital (WACC)?