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(Solved): Currently, Company Xeon has 3.5 million common shares of equity stock outstanding. The company also ...



Currently, Company Xeon has 3.5 million common shares of equity stock outstanding. The company also has $32 million face value of bonds that have 4 years remaining to maturity and 6% coupon with quarterly payments, and are priced to yield 7.8353%. If Company Xeon would issue new bonds, the bonds will be priced at par. If it issues up to $12 million of new bonds, the bonds will have a yield of 7.8353%. If it issues new bonds more than $12 million but up to $16 million, the expected yield on the entire issuance will be 10%. If it issues new bonds beyond $16 million, the expected yield on the entire issuance will be 12%. For the common shares of Company Xeon, it is noted that:  the company can issue new shares at $20 per share.  beta of the equity stock is1.5.  current risk-free rate is 2%  expected market return is 8%. Company Xeno’s marginal tax rate is 25%. If the company raises $50 million of new capital while maintaining the same debt-to-equity ratio, what is its weighted average cost of capital?



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