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Business, 10.10.2019 02:10 brittanyjacob8

Afew years ago the firm issued $4,000,000 debt with a coupon rate of 4%; currently that debt is trading with a yield to maturity of 5.5% and a value of $3,500,000. the firm has 1,000,000 common shares outstanding at a value of $6/share. you look up the asset beta for firms in the same industry (sic) code and determine that value is 1.15. the firm plans on keeping it's d/e ratio constant (at the current level) going forward and the tax rate is expected to be 35%. the beta of the firms debt is estimated as 0.10, the risk free rate is 3% and the market return is 9.8%.

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Afew years ago the firm issued $4,000,000 debt with a coupon rate of 4%; currently that debt is tra...
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