Problem 2-18 Functions of Financial Markets (LO3)Consider the table shown below to answer the question posed in part a. Parts b and c are independent of the given table. Number of Share(millions)× Stock Price= MarketCapitalization($ millions)Callaway Golf (ELY)94.6 × $16.36 = $1547.66 Alaska Air Group (ALK)123.4 × $61.96 = $7645.86 Yum! Brands (YUM)332.5 × $85.13 = $28,305.73 Caterpillar Tractor (CAT)147.4 × $597.63 = $88,090.66 Microsoft (MSFT)7,705.0 × $91.27 = $703,235.35 a. The price of Yum! Brands stock has risen to $180. What is the market value of the firm’s equity if the number of outstanding shares does not change? (Enter your answer in billions rounded to 3 decimal places.) b. The rating agency has revised Catalytic Concepts' bond rating to A (use Table 2.2). What interest rate, approximately, would the company now need to pay on its bonds? (Enter your answer as a percent rounded to 1 decimal place.)

Note: Part b is the independent question. Please report it separately. I am solving part a only. The…

Answered: Problem 2-18 Functions of Financial…

Fundamentals Of Financial Management, Concise Edition (mindtap Course List)

10th Edition

ISBN:9781337902571

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter9: Stocks And Their Valuation

Section: Chapter Questions

Problem 9TCL

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Problem 2-18 Functions of Financial Markets (LO3)

Consider the table shown below to answer the question posed in part a. Parts b and c are independent of the given table.

	Number of Share (millions)	×	Stock Price	=		Market Capitalization ($ millions)
Callaway Golf (ELY)	94.6		×		$	16.36	=	$	1547.66
Alaska Air Group (ALK)	123.4		×		$	61.96	=	$	7645.86
Yum! Brands (YUM)	332.5		×		$	85.13	=	$	28,305.73
Caterpillar Tractor (CAT)	147.4		×		$	597.63	=	$	88,090.66
Microsoft (MSFT)	7,705.0		×		$	91.27	=	$	703,235.35

a. The price of Yum! Brands stock has risen to $180. What is the market value of the firm’s equity if the number of outstanding shares does not change? (Enter your answer in billions rounded to 3 decimal places.)

b. The rating agency has revised Catalytic Concepts' bond rating to A (use Table 2.2). What interest rate, approximately, would the company now need to pay on its bonds? (Enter your answer as a percent rounded to 1 decimal place.)

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