Use the following information: Debt: $69,000,000 book value outstanding. The debt is trading at 95% of book...

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Finance

Use the following information:
Debt: $69,000,000 book value outstanding. The debt is tradingat 95% of book value. The yield to maturity is 10%.
Equity: 1,900,000 shares selling at $36 per share. Assume theexpected rate of return on Federated’s stock is 19%.
Taxes: Federated’s marginal tax rate is T_c= .35.
Suppose Federated Junkyards decides to move to a moreconservative debt policy. A year later its debt ratio is down to16.50% (D/V = .165). The interest rate has dropped to9.6%. The company’s business risk, opportunity cost of capital, andtax rate have not changed.
Use the three-step procedure to calculate Federated’s WACC underthese new assumptions. (Do not round intermediatecalculations. Enter your answer as a percent rounded to 2 decimalplaces.)
Weighted-average cost of capital %

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Current DE calc MV of equityPrice of equitynumber of shares outstanding MV of equity361900000 68400000 MV of BondPar valuebonds outstandingage of par MV of Bond100069000095 65550000 MV of firm MV of Equity MV of See Answer

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Use the following information:Debt: $69,000,000 book value outstanding. The debt is tradingat 95% of book value. The yield to maturity is 10%.Equity: 1,900,000 shares selling at $36 per share. Assume theexpected rate of return on Federated’s stock is 19%.Taxes: Federated’s marginal tax rate is Tc= .35.Suppose Federated Junkyards decides to move to a moreconservative debt policy. A year later its debt ratio is down to16.50% (D/V = .165). The interest rate has dropped to9.6%. The company’s business risk, opportunity cost of capital, andtax rate have not changed.Use the three-step procedure to calculate Federated’s WACC underthese new assumptions. (Do not round intermediatecalculations. Enter your answer as a percent rounded to 2 decimalplaces.)Weighted-average cost of capital %