Bridgetron
an Analyst Wants to Value the Sum of the Debt

question 51

Essay

Bridgetron
An analyst wants to value the sum of the debt and equity capital of the firm and is provided with the following information:
$\begin{array}{llcc} \text { Total assets } &\$25,675 \\ \text {Interest-Bearing Debt } &\$18,525\\ \text { Average pre-tax borrowing cost } &9.25\%\\ \text {Common equity. } &\\ \text { Book value } &\$8,950\\ \text { Market value } &\$34,956\\ \text { Income tax Rate} &35\%\\ \text { Market Equity Beta}&1.05 \\\text { Risk-free Rate }&3.8\%\\ \text {Market Premium } &5.7\%\end{array}$

An analyst wants to value the common shareholders' equity of Bridgetron, compute the relevant cost of capital that should be used.

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Definitions:

Dentin

The hard, dense, bony tissue forming the bulk of a tooth beneath the enamel.

Crown

In dentistry, a type of dental restoration which completely caps or encircles a tooth or dental implant, used to improve their appearance or strength.

Pilonidal

Pertaining to a type of cyst that occurs in the crease of the buttocks and can become infected and filled with pus.

Pil/o

A prefix in medical terminology related to hair, such as in pilosebaceous, which refers to structures consisting of hair and its associated sebaceous gland.