Estimate the market value of equity and debt

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Reference no: EM13937402

You are trying to estimate the cost of capital for Miami Corp and had collected the following information: Ø The firm has debt with a book value of 20 million, trading at 120% of par bond Ø The bonds have a yield to maturity of 7%.Ø There are 2 million shares trading at $19 per share. Ø The beta for the firm is 1.133Ø The ten-year T-bond rate is 5.2%Ø The market risk premium is 6%Ø Tax rate is 35%

(a) Estimate the market value of the debt

(b) Estimate the market value of Equity

(d) Estimate the cost of capital for the firm

Reference no: EM13937402

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