Fuerst Cola has 10,000 bonds and 400,000 shares outstanding. The bonds have a 10% annual coupon, $1,000 face value, $1,050 market value, and 10-year maturity. The beta on the stock is 1.30 and its price per share is $40. The riskless return is 6%, the expected market return is 14%, and Fuerst Cola's tax rate is 40%.
Please show step by step how you reached the results, ie. what functions were used, formula, how it should be posted in excel, etc.© BrainMass Inc. brainmass.com October 9, 2019, 11:41 pm ad1c9bdddf
Please see the attached Excel 97-2003 file.
Because the bonds are selling at a premium to their face (par) value, we must determine the market rate of return on them (which is also their cost). We use the Excel ...
Using an Excel 97-2003 spreadsheet, this solution illustrates the computation of the after tax weighted-average cost of capital when the market values of bonds exceed their par (face) values.