The Anson Jackson Court Company (AJC) currently has $200,000 market value (and b
ID: 2696167 • Letter: T
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The Anson Jackson Court Company (AJC) currently has $200,000 market value (and book value) of perpetual debt outstanding carrying a coupon rate of 6%. Its earnings before interest and taxes (EBIT) are $100,000, and it is a zero growth company. AJC's current cost of equity is 8.8%, and its tax rate is 40%. The firm has 10,000 shares of common stock outstanding selling at a price per share of $60.00.What is AJC's current total market value and weighted average cost of capital? Answer $600,000; 7.5% $600,000; 8.0% $800,000; 7.0% $800,000; 7.5% $800,000; 8.0% The Anson Jackson Court Company (AJC) currently has $200,000 market value (and book value) of perpetual debt outstanding carrying a coupon rate of 6%. Its earnings before interest and taxes (EBIT) are $100,000, and it is a zero growth company. AJC's current cost of equity is 8.8%, and its tax rate is 40%. The firm has 10,000 shares of common stock outstanding selling at a price per share of $60.00.What is AJC's current total market value and weighted average cost of capital? $600,000; 7.5% $600,000; 8.0% $800,000; 7.0% $800,000; 7.5% $800,000; 8.0% $600,000; 7.5% $600,000; 8.0% $800,000; 7.0% $800,000; 7.5% $800,000; 8.0%Explanation / Answer
current cost of capital is 3/4 * 8.8 + 0.6 * 1/4 * 6 = 7.5%
Value of the company is 600,000 ( simply the equity )
Hence a) 600,000; 7.5%
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