MV Corporation has debt with market value of $102 million, common equity with a book value of $97 million, and preferred stock worth $18 million outstanding. Its common equity trades at $55 per share, and the firm has 6.4 million shares outstanding. What weights should MV Corporation use in its WACC?
a. The debt weight for the WACC calculation is __% (Round to two decimal places.)
b. The preferred stock weight for the WACC calculation is __% (Round to two decimal places.)
c. The common equity weight for the WACC calculation is: __% (Round to two decimal places.)
Book Co. has 1.3 million shares of common equity with a par (book) value of $1.40, retained earnings of $28.3 million, and its shares have a market value of $48.99 per share. It also has debt with a par value of $21.5 million that is trading at 105% of par.
a. What is the market value of its equity?
b. What is the market value of its debt?
c. What weights should it use in computing its WACC?
Avicorp has a $10.6 million debt issue outstanding, with a 5.8% coupon rate. The debt has semi-annual coupons, the next coupon is due in six months, and the debt matures in five years. It is currently priced at 94% of par value.
a. The cost of debt is __% per year. (Round to four decimal places.)
b. If Avicorp faces a 40% tax rate, what is its after-tax cost of debt?