NARRBEGIN: Running Shoes, Inc.
Running Shoes, Inc.
Running Shoes, Inc. has 2 million shares of stock outstanding. The stock currently sells for $12.50 per share. The firm’s debt is publicly traded and was recently quoted at 90% of face value. It has a total face value of $10 million, and it is currently priced to yield 8%. The risk free rate is 2% and the market risk premium is 8%. You’ve estimated that the firm has a beta of 1.20. The corporate tax rate is 40%.
NARREND

-What is the percentage of equity used by Running Shoes,Inc.?

Question

NARRBEGIN: Running Shoes, Inc.
Running Shoes, Inc.
Running Shoes, Inc. has 2 million shares of stock outstanding. The stock currently sells for $12.50 per share. The firm’s debt is publicly traded and was recently quoted at 90% of face value. It has a total face value of $10 million, and it is currently priced to yield 8%. The risk free rate is 2% and the market risk premium is 8%. You’ve estimated that the firm has a beta of 1.20. The corporate tax rate is 40%.
NARREND

-What is the percentage of equity used by Running Shoes,Inc.?

Quizplus · Accepted Answer

DE