Equivalent-maturity government of canada debt

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Big Door Company has 10.3 million shares outstanding, which are currently trading for about $19 per share and have an equity beta of 1.2. Big Door has 20,700 outstanding bonds, with a 5 percent coupon rate, payable semi-annually and due in 10 years. The bonds are rated BBB. Currently the credit spread for BBB is 140 basis points over equivalent-maturity Government of Canada debt. The current yield on 10-year Canada bonds is 2 percent, compounded semi-annually. The risk-free interest rate is 2.2 percent, and the market risk premium is 6.4 percent. The company has a 35 percent tax rate

Reference no: EM131920754

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