24 Jul WHAT IS THE CURRENT BETA ON BLOOMS COMMON STOCK?
Anyone help me with this problem? Starting from number 3. According to the my text if there is no d Show more Anyone help me with this problem? Starting from number 3. According to the my text if there is no debt the D/E is zero which means the current beta is also the unlevered beta. Without the unlevered beta I cant solve the rest of the problem. Thanks!! Currently Bloom Flowers Inc. has a capital structure consisting of 30% debt and 70% equity. Blooms debt currently has an 7% yield to maturity. The risk-free rate (rRF) is 5% and the market risk premium (rM rRF) is 8%. Using the CAPM Bloom estimates that its cost of equity is currently 12%. The company has a 40% tax rate. Blooms financial staff is considering changing its capital structure to 40% debt and 60% equity. If the company went ahead with the proposed change the yield to maturity on the companys bonds would rise to 9.5%. The proposed change will have no effect on the companys tax rate. What is Blooms current WACC? Round your answer to two decimal places. 9.66% What is the current beta on Blooms common stock? Round your answer to two decimal places. .88 What would Blooms beta be if the company had no debt in its capital structure? (That is what is Blooms unlevered beta bU?) Round your answer to two decimal places. What would be the companys new cost of equity if it adopted the proposed change in capital structure? Round your answer to two decimal places. % What would be the companys new WACC if it adopted the proposed change in capital structure? Round your answer to two decimal places. % Show less
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