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On January 1, the total market value of the Tysseland Company was $60 million. During the year, the company plans to raise and invest $30 million in...
On January 1, the total market value of the Tysseland Company was $60 million. During the year, the company plans to raise and invest $30 million in new projects. The firm's present market value capital structure, shown here, is considered to be optimal. There is no short-term debt.
Debt - $30,000,000
Common Equity -$30,000,000
total Captial = $60,000,000
New bonds will have an 8% coupon rate, and they will be sold at par. Common stock is currently selling at $30 a share. The stockholders' required rate of return is estimated to be 12%, consisting of a dividend yield of 4% and an expected constant growth rate of 8%. (The next expected dividend is $1.20, so the dividend yield is $1 20 $30
