What percent of the company's financing is debt?

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240,000 bonds with $1k face value with 7.5% coupons with yrly. payments, 20 yrs. to maturity,& currently sells for $940. Marginal tax rate is 40%. Equity is 9M shares, selling for $71@share, beta is 1.2, risk free rate 1%,& market risk premium is 10%

May 4th, 2015

D/E = 240,000*1000 / 9,00,00,00*71 = 0.375

D/V = D/(D+E) = 0.375 / (1+ 0.375) = 0.273 (ANSWER)

May 5th, 2015

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