Please use Excel spreadsheet for complete info1. Grand Adventure Properties offers a 8 percent coupon bond with annual payments. The yield to maturity is 6.85 percent and the maturity date is 8 years from today. What is the market price of this bond if the face value is $1,000?$951.69$1,069.07$1,077.18$877.51$1,020.763. A Japanese company has a bond outstanding that sells for 89 percent of its ¥100,000 par value. The bond has a coupon rate of 4.8 percent paid annually and matures in 19 years. What is the yield to maturity of this bond? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)10. Central Systems, Inc. desires a weighted average cost of capital of 9 percent. The firm has an after-tax cost of debt of 6 percent and a cost of equity of 12 percent. What debt-equity ratio is needed for the firm to achieve its targeted weighted average cost of capital?1.001.17.901.10.83
11. Miller Manufacturing has a target
debt–equity ratio of .50. Its cost of equity is 15 percent, and its cost of
debt is 6 percent. If the tax rate is 34 percent, what is the company’s WACC?
(Do not round intermediate calculations and enter your answer as a percent
rounded to 2 decimal places, e.g., 32.16.)
12. Filer Manufacturing has 5 million shares of
common stock outstanding. The current share price is $84, and the book value per share is $7. The
company also has two bond issues outstanding. The first bond issue has a face
value $60 million, a
coupon of 7 percent,
and sells for 94 percent of par. The second issue has a face value
of $35 million, a coupon of 8 percent, and sells for 107 percent of par. The first issue
matures in 22 years, the second in 4 years.
13. Titan Mining Corporation has 9.7 million shares of common stock
outstanding and 410,000 –4 percent semiannual bonds outstanding, par value
$1,000 each. The common stock currently sells for $45 per share and has a
beta of 1.35, and the bonds have 10 years to maturity and sell for 116
percent of par. The market risk premium is 8.5 percent, T-bills are yielding
5 percent, and the company’s tax rate is 35 percent.1. Grand Adventure Properties offers a 8 percent coupon bond with annual payments. The yield to
maturity is 6.85 percent and the maturity date is 8 years from today. What is the market price of
this bond if the face value is $1,000?
$951.69
$1,069.07
$1,077.18
$877.51
$1,020.76
Per value bond outstanding/Face Value
coupon rate/ coupon payment
yield to maturity/interest rate
Coupon Bond %
1000
6.85
8
8
3. A Japanese company has a bond outstanding that sells for 89 percent of its ¥100,000 par
value. The bond has a coupon rate of 4.8 percent paid annually and matures in 19 years.
What is the yield to maturity of this bond? (Do not round intermediate calculations and
enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Yield to maturity
%
10. Central Systems, Inc. desires a weighted average cost of capital of 9 percent. The firm
has an after-tax cost of debt of 6 percent and a cost of equity of 12 percent. What debtequity ratio is needed for the firm to achieve its targeted weighted average cost of
capital?
1.00
1.17
.90
1.10
.83
11. Miller Manufacturing has a target debt–equity ratio of .50. Its cost of equity is 15
percent, and its cost of debt is 6 percent. If the tax rate is 34 percent, what is the
company’s WACC? (Do not round intermediate calculations and enter your answer as a
percent rounded to 2 decimal places, e.g., 32.16.)
Target D/E ratio
cost of equity
cost of debt
Tax rate
WACC
50%
15% %
6% %
34% %
55%
14%
9%
40%
%
10.95%
155.00%
35.48
35.48
64.52%
60%
We = 1/(1+0.55) = 64.52
Wd = 100-64.52 = 35.48
64.52*14+(100-64.52)*9*(1-0.4) = 10.95
0.55) = 64.52
64.52 = 35.48
(100-64.52)*9*(1-0.4) = 10.95
Filer Manufacturing has 5 million shares of common stock outstanding. The current share price is $84, and the book value p
shares million
current stock price
book value per share
equity
bond 1
bond 2
total
$
$
4,000,000
76
5.00
book value
$
20,000,000
$
90,000,000
$
70,000,000
$ 180,000,000
11.11%
50.00%
38.89%
100.00%
face value
coupon
price (% of par)
bond 1
$
90,000,000
5%
94%
equity
bond 1
bond 2
total
market value
$
304,000,000
$
846,000
$
728,000
$
305,574,000
A:
Equity / Value
Debt / Value
What are the company’s capital structure weights on a book value basis? (Do not round intermediat
B:
Equity / Value
Debt / Value
What are the company’s capital structure weights on a market value basis? (Do not round intermed
C:
Which are more relevant?
0 Market value weights
nt share price is $84, and the book value per share is
bond 2
$
70,000,000
6%
104%
99.48%
0.28%
0.24%
100.00%
ok value basis? (Do not round intermediate
arket value basis? (Do not round intermediate
Titan Mining Corporation has 9.7 million shares of common stock outstanding and 410,000 –4 percent
semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $45 per
share and has a beta of 1.35, and the bonds have 10 years to maturity and sell for 116 percent of par.
The market risk premium is 8.5 percent, T-bills are yielding 5 percent, and the company’s tax rate is 35
percent.
Common Stock shares
smiannual bonds outstanding
bonds par value $ each
Common stock sale $
Beta
Maturity in years
sell for % of par
Market risk premium %
T-bill yielding %
Tax rate %
9,700,000
410,000
1,000
45
1.35
10
116
8.5
5
35
A:
Equity / Value
Debt / Value
What is the firm’s market value capital structure? (Do not round
B:
If the company is evaluating a new investment project that has the
Discount rate
%
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