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Firm market value debt-equity ratio

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-A firm has 10,000 perpetual bonds outstanding. The bonds have a par value of $1,000 and a coupon rate of 6 percent paid annually. The nominal interest rate on these bonds is 5.2 percent. The firm also has 1 million shares of stock outstanding with a market price of $22.50 per share. What is the firm's market value debt-equity ratio?

-A company is considering a project with an initial cost of $28,000. The project will produce a cash inflows of $18,000 after the first year and an additional $5,000 for each of the following three years. The firm has a pretax cost of debt of 6% and a cost of levered equity of 10%. The debt-equity ratio is 0.38 and the tax rate is 20%. The project has the same risk as the firm. What is the net present value of the project? [Hint: you'll first need to calculate the appropriate discount rate].

Reference no: EM133001435

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