Problemthe a j croft company ajc currently has 200000, Ask an Expert

Accounting

Problem:

The A. J. Croft Company (AJC) currently has $200,000 market value (and book value) of perpetual debt outstanding carrying a coupon rate of 6%. Its earnings before interest and taxes (EBIT) are $100,000, and it is a zero growth company. AJC's current cost of equity is 8.8%, and its tax rate is 40%. The firm has 10,000 shares of common stock outstanding selling at a price per share of $60.00. Refer to Multi-Part 15-4.

Requirement:

Question: What is AJC's current total market value and weighted average cost of capital?

$600,000; 7.5%
$600,000; 8.0%
$800,000; 7.0%
$800,000; 7.5%
$800,000; 8.0%

Note: Please provide reasons to support your answer.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91171932

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