Margo is a major producer of lawn care products. Its stock currently sales for $
ID: 1094701 • Letter: M
Question
Margo is a major producer of lawn care products. Its stock currently sales for $80 per share; there are 10.5 million shares outstanding. Margo also has 400,000 bonds outstanding ($1000 face value per bond). These 10-year bonds pay annually have a current yield of 10% and trade at 90% of the face value. The risk free rate is 8%. The market risk premium is 9%, and Margo has beta equal to 2. The corporate tax rate is 34%. A. Margo is considering expansion of its facilities. Use the SML to determine the cost of equity. B. Compute the WACC for Margo.please provide on excel spreadsheet
Explanation / Answer
a)Re=0.080+(2.00*0.090)=0.2600=26.00%
b)The market value of Margo