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:

Physical Harm

Damage or injury inflicted on a person's body, as opposed to damage to property or reputation.

Financial Outlay

The total amount of money that is spent or invested on a particular activity or project.

Product Performance

An evaluation of how well a product does its intended job, including its efficiency, reliability, and overall user satisfaction.

Subliminal Perception

The process by which individuals can respond to information and stimuli that are below the level of conscious awareness.