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Differences between debt financing and equity financing

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a) Cully Berhad has 8,000 units bond with a semi-annual coupon of 6.5 percent outstanding, par value RM1,000 each. The bonds have 20 years to maturity and sell for 85.13 percent of par. The firm also has an issue of 15,000 shares of 6 percent preferred stock outstanding with a market price of RM93. Cully Berhad also has 250,000 ordinary shares outstanding which are currently selling for RM57 per share and has a beta of 1.05. The market risk premium is 8 percent, T-bills are yielding 4.5 percent and the company tax rate is 25 percent. Calculate Cully Berhad's market value capital structure and weighted average cost of capital.

b) Discuss the differences between debt financing and equity financing.

c) Discuss the general procedures a private firm must follow to go public via an initial public offering (IPO).

Reference no: EM132576521

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