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Explain what factors might have caused the market value

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Question - Weighted Average Cost of Capital - Ravenswood Corporation has the following numbers on its Audited Balance Sheet:  outstanding debt of $450,000 and common equity of $900,000.  The debt has a current market value of $400,000.  The company's equity has a market value of $1,050,000. Assume that the cost of equity is 9.0% and the yield to maturity on the debt is 7.0 % The relevant tax rate is 21%.

Explain what factors might have caused the market value of debt to change and the market value of equity to change from the accounting balance sheet numbers.

Reference no: EM132956388

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