The Basket Weavers Company has 100,000 bonds outstanding that are selling at par

Question

The Basket Weavers Company has 100,000 bonds outstanding that are selling at par value. Bonds with similar characteristics are yielding 7.5 percent. The company also has 1 million shares of 10.5 percent preferred stock outstanding and 5 million shares of common stock outstanding. The preferred stock sells for $56 per share. The common stock has a beta of 1.2 and sells for $38 a share. The U.S. Treasury bill is yielding 3 percent and the return on the market is 12 percent. The corporate tax rate is 34 percent. What is Basket Weaver

Explanation / Answer

ans . 12.04%

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