Question

A company has 3 million shares outstanding that are currently priced at $4 each and have a beta of 1.3. Seven years ago the company issued bonds with a total face value of $3 million. One bond has a face value of $500,000. The bonds have a coupon rate of 3% p.a. and coupons are paid every six months. The bonds mature in eight years from today. The bonds currently yield 2% p.a., the return on the stock market is 7% p.a., the risk-free return is 1% p.a., and the company tax rate is 30%.

What proportion of the firm's capital structure is debt?

Answer #1

**SEE THE IMAGE. ANY DOUBTS,
FEEL FREE TO ASK. THUMBS UP PLEASE**

**WEIGHT OF DEBT = 0.2116 OR
21.16%**

A company has 3 million shares outstanding that are currently
priced at $4 each and have a beta of 1.3. Seven years ago the
company issued bonds with a total face value of $3 million. One
bond has a face value of $500,000. The bonds have a coupon rate of
3% p.a. and coupons are paid every six months. The bonds mature in
eight years from today. The bonds currently yield 2% p.a., the
return on the stock market is...

A company has 2 million shares outstanding that are currently
priced at $4 each and have a beta of 1.3. Five years ago the
company issued bonds with a total face value of $3 million. One
bond has a face value of $250,000. The bonds have a coupon rate of
3% p.a. and coupons are paid every six months. The bonds mature in
fifteen years from today. The bonds currently yield 4% p.a., the
market return is 7% p.a., the...

A company has 2 million shares outstanding that are currently
priced at $4 each and have a beta of 1.3. Five years ago the
company issued bonds with a total face value of $3 million. One
bond has a face value of $250,000. The bonds have a coupon rate of
3% p.a. and coupons are paid every six months. The bonds mature in
fifteen years from today. The bonds currently yield 4% p.a., the
market return is 7% p.a., the...

A company has 2 million shares outstanding that are currently
priced at $4 each and have a beta of 1.3. Five years ago the
company issued bonds with a total face value of $3 million. One
bond has a face value of $250,000. The bonds have a coupon rate of
3% p.a. and coupons are paid every six months. The bonds mature in
fifteen years from today. The bonds currently yield 4% p.a., the
market return is 7% p.a., the...

A company has 3 million shares outstanding at a market price of
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A company has 3 million shares outstanding at a market price of
$1.50 each. The company's bonds have a total market value of
$2,700,000, have a coupon rate of 3% p.a. and currently yield 4%
p.a. The current market value of preference shares is $500,000 and
currently return 5% p.a. The company has a beta of 0.7, the market
risk premium is 6% p.a., the risk-free return is 2% p.a., and the
company tax rate is 30%,
What is the...

A company has 3 million shares outstanding at a market price of
$1.50 each. The company's bonds have a total market value of
$2,700,000, have a coupon rate of 3% p.a. and currently yield 4%
p.a. The current market value of preference shares is $500,000 and
currently return 5% p.a. The company has a beta of 0.7, the market
risk premium is 6% p.a., the risk-free return is 2% p.a., and the
company tax rate is 30%,
What is the...

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