What is the current required rate of return on the equity of FINA corp?FINA issued 30 year bond 5 years ago. The current market value of debt is 50 million. The face value of the bond is 44.5 million. The coupon rate is 6%. The bond pays coupon semiannually. What is the current cost of debt? FINA Corp. is considering a new project, which is to enter a new industry of kitchen appliances. FINA Corp's beta without thenew project is 1.2. The market risk premium is 7%. The risk-free rate is 3%. The total shares outstanding of FINA is 20 million.The stock price now is $5 per share. The tax rate is 35%. The following three firms are in the new industry that FlINA wants toenter. Firm A is a competitor of FINA in auto parts. Firm A also has a division in kitchen appliances. Firm B is producing kitchenappliances and all kinds of furniture. Firm C is in the kitchen appliances business only. The Beta of firms A, B, and C are 0.9, 1.1,1.5, respectively.

Required rate on equity=Risk free rate +Beta x market risk premium

What is the current required rate of return on the equity of FINA corp? FINA issued 30 year bond 5 years ago. The current market value of debt is 50 million. The face value of the bond is 44.5 million. The coupon rate is 6%. The bond pays coupon semiannually. What is the current cost of debt?

What is the current required rate of return on the equity of FINA corp? FINA issued 30 year bond 5 years ago. The current market value of debt is 50 million. The face value of the bond is 44.5 million. The coupon rate is 6%. The bond pays coupon semiannually. What is the current cost of debt?

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter11: Cash Flow Estimation And Risk Analysis

Section: Chapter Questions

Problem 8P

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