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Raymond Mining Corporation has 2 million shares of common stockoutstanding and 25,000 semiannual bonds outstanding, each with anannual coupon rate of 10% and a par value $1,000. The common stockcurrently sells for $35 per share and has a beta of 1.25. The bondshave exactly 10 years to maturity and the current annual yield tomaturity (YTM) is 9%. The market risk premium for stocks is 7.6%,T-bills are yielding 4%, and company's tax rate is 35%. Assume thatCAPM holds, but IGNORE the impact of leverage on cost of equitycapital. Calculate the following: Market Value of debt = $ MarketValue Debt/Equity Ratio = After tax Cost of Debt = % Cost ofequity= % WACC = %
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