Suppose today is january 1 2016 on january 1 2006 xyz, Ask an Expert

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Suppose today is January 1, 2016; on January 1, 2006, XYZ industries issued a 30-year bond with a 5% coupon, paid semi-annually, and a $1,000 face value payable on January 1, 2036. The bond now sells for $975. Assume a 34% tax rate. a) Use this bond to determine the firm's after -tax cost of debt. Suppose the market risk premium is 3.5%, the T-bill rate is 1% and XYZ Industries has a beta equal to 1.35 b) Use the SML to compute the firm's cost of equity. c) Assume the debt/equity ratio for XYZ Ind. is .30 Using 4 decimals for the weights, calculate the WACC. Show procedure.

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Financial Management, Finance

Category:- Financial Management
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