You have the following information about Burgundy Basins, a sink manufacturer. ...
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Finance
You have the following information about Burgundy Basins, a sink manufacturer.
Equity shares outstanding
20
million
Stock price per share
$
39
Yield to maturity on debt
7.5
%
Book value of interest-bearing debt
$
350
million
Coupon interest rate on debt
4.4
%
Market value of debt
$
245
million
Book value of equity
$
410
million
Cost of equity capital
11.8
%
Tax rate
35
%
Burgundy is contemplating what for the company is an average-risk investment costing $38 million and promising an annual ATCF of $4.9 million in perpetuity.
a. What is the internal rate of return on the investment? (Round your answer to 2 decimal places.)
b. What is Burgundy's weighted-average cost of capital? (Round your answer to 2 decimal places.)
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