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Consider the following company,
Book Value of Debt
$50 million
YTM
10%
Coupon
7%
Coupon Payments
semi-annually
Years
20
Corporate Tax Rate
33%
# of Preferred Shares
2 million
Price of Preferred Share
$25
Dividend per Preferred Shares
$1.33
# of Common Shares
9.5 million
Price of Common Share
$19
β of Common Stock
1.3
Risk-Free Rate
4%
Market Return
a. What is the market value of the debt? Enter your answer in terms of millions and rounded to 2 DECIMAL PLACES.
b. What is the rate of return on the preferred stock? Enter you answer as a percentage and rounded to 2 DECIMAL PLACES. Do not include the percentage sign in your answers.
c. What is the market value of the preferred stock? Enter your answer in terms of millions.
d. What is the rate of return of the equity? Enter your answer as a percentage. Do not include the percentage sign in your answers.
e. What is the market value of the equity? Enter your answer in terms of millions.
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