Burton Corp. (BC) has 5,000 zero-coupon bonds outstanding; each is priced at $795.00 and has...
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Burton Corp. (BC) has 5,000 zero-coupon bonds outstanding; each is priced at $795.00 and has four years to maturity. BC's market capitalization is $9.50 mln, the firm's stock has a beta of 1.40 and there are currently 625,000 shares outstanding. Government of Canada 10 Year Benchmark Bonds are currently priced to yield 70 basis points and the anticipated market premium on the S&P/TSX Composite Index is 625 basis points per year over the next five years. BC's marginal tax rate is 25%. Determine Burton Corp.'s weighted average cost of capital. [20 points] Burton Corp. (BC) has 5,000 zero-coupon bonds outstanding; each is priced at $795.00 and has four years to maturity. BC's market capitalization is $9.50 mln, the firm's stock has a beta of 1.40 and there are currently 625,000 shares outstanding. Government of Canada 10 Year Benchmark Bonds are currently priced to yield 70 basis points and the anticipated market premium on the S&P/TSX Composite Index is 625 basis points per year over the next five years. BC's marginal tax rate is 25%. Determine Burton Corp.'s weighted average cost of capital. [20 points]
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