Question
In: Finance
Fancy furniture LTD is a company that produces high-quality custom furniture for commercial and residential customers....
Fancy furniture LTD is a company that produces high-quality custom furniture for commercial and residential customers. You have been asked to calculated the WACC for this company and are given the following information;
- Fancy furniture ltd is a publicly listed company and it currently has 20 million ordinary shares on issue. The beta of its share is 1.7
- FF is forecasting to pay a dividend of $0.8 in the coming year and the dividend is expected to grow at a rate of 5% per annum.
- Government bonds are currently trading at 4% per annum and the market risk premium is 7%
- The firm has 2 million preference shares outstanding with a current market price at $90 per share. The par value of the preference shares is $100. Preference shares pay a constant dividend of $4.5 per year.
- Five years ago, FF took out a 20 year long-term loan, with an initial value of $1 million, with its bank for a mortgage of a new storage warehouse. The cost of this loan is 6% per annum, assumed to be paid annually (at the end of each year)
- The company has a short term loan of $0.5 million on the balance sheet. The cost of this loan is 4.7% per annum .
- The company’s debentures are publicly traded and their market price equals to 93% of the face value. The debentures pay coupons semi-annually. The book value of the debenture is $3 million and the current yield to maturity of a corporate debenture is 12% per annum
a) calculate the cost of equity
b) calculate the current price for ordinary share
c) calculate the discount rate for preference share
d) calculate the market value of the long term loan
e) calculate the market value of the short term loan
F) calculate the market value of debentures
G) what is the total market value of equity
H) what is the total market value of debt
I) calculate the overall cost of debt of the company (before tax)
J) calculate the overall cost of equity
Solutions
Expert Solution
Answer) Please Find attached screenshots. Since any particular question have not been asked, i have answer the 1st four questions.
Good luck!
jeff jeffy answered 2 years agoRelated Solutions
Johnson Fine Furniture produces elegant, high quality, hand-crafted wood furniture. The company is well known for...
Johnson Fine Furniture produces elegant, high quality,
hand-crafted wood furniture. The company is well known for its
superior craftsmanship. The company had the following results
during its most recent fiscal year:
Coffee Tables
End Tables
Lamps
Totals
Units
1,700
2,300
2,000
6,000
Sales Revenue
$ 2,125,000
$ 2,070,000
$ 280,000
$ 4,475,000
Variable Costs
Materials & Labor
1,360,000
1,495,000
220,000
$ 3,075,000
Overhead
255,000
184,000
50,000
$ 489,000
Contribution Margin
$ ...
Frieda Falcon Fine Furniture produces elegant, high quality, hand-crafted wood furniture. The company is well known for...
Frieda Falcon Fine Furniture produces elegant, high quality,
hand-crafted wood furniture. The company is well known
for its superior craftsmanship. The company had the
following results during its most recent fiscal year:
Coffee Tables
End Tables
Lamps
Totals
Units
1,700
2,300
2,000
6,000
Sales Revenue
$ 2,125,000
$ 2,070,000
$ 280,000
$ 4,475,000
Variable Costs
Materials & Labor
1,360,000
1,495,000
220,000
$ 3,075,000
Overhead
255,000
184,000
50,000
$ 489,000
Contribution Margin
$ 510,000
$ 391,000
$ 10,000
$ 911,000
Fixed Costs
Allocated GS&A
103,700
140,300
122,000
$ 366,000
Marketing & Engineering
68,000
46,000...
A retail carpet business has primarily residential customers together with a few commercial customers that make...
A retail carpet business has primarily residential customers
together with a few commercial customers that make large purchases.
Usually, the business sells an average of 100 square yards of
carpet with a standard deviation of 90 square yards. The
distribution of carpet sales is
Select one:
a. right-skewed.
b. left-skewed.
c. skewed, but we can’t tell whether it’s left-skewed or
right-skewed
d. approximately symmetric, but not Normal.
e. approximately Normal.
f. There’s no way to tell what shape the distribution...
Fancy Millwork has a factory that produces custom kitchen cabinets. It has multiple product lines. Materials...
Fancy Millwork has a factory that produces custom kitchen
cabinets. It has multiple product lines.
Materials and labor for the cabinets are determined by each job.
To simplify the assignment, we will assume the following average
costs.
The company estimates that it will have 32,000 direct labor
hours in total for the kitchen cabinets.
The materials include $2,000 for the wood and other materials on
a per job basis. It requires 40 hours of labor on average for a
custom...
Fancy Millwork has a factory that produces custom kitchen cabinets. It has multiple product lines. Materials...
Fancy Millwork has a factory that produces custom kitchen
cabinets. It has multiple product lines. Materials and labor for
the cabinets are determined by each job. To simplify the
assignment, we will assume the following average costs. The company
estimates that it will have 32,000 direct labor hours in total for
the kitchen cabinets. The materials include $2,000 for the wood and
other materials on a per job basis. It requires 40 hours of labor
on average for a custom...
Fancy Millwork has a factory that produces custom kitchen cabinets. It has multiple product lines. Materials...
Fancy Millwork has a factory that produces custom kitchen
cabinets. It has multiple product lines. Materials and labor for
the cabinets are determined by each job. To simplify the
assignment, we will assume the following average costs. The company
estimates that it will have 32,000 direct labor hours in total for
the kitchen cabinets. The materials include $2,000 for the wood and
other materials on a per job basis. It requires 40 hours of labor
on average for a custom...
The Spurling Brigade Company produces custom widgets for its customers. The company uses an activity-based costing...
The Spurling Brigade Company produces custom widgets for its
customers. The company uses an activity-based costing system for
its overhead costs. The company has provided the following data
from its activity-based costing system.
Activity Cost
Pool Total
Cost Total Activity
Assembling………..... $101,574 16,200
machine hours
Job
Support………… 32,724 1,800
jobs
Customer
support…... 5,472
320 clients
Other………………. 100,000
Not
applicable
Total………………. $239,770
The "Other" activity cost pool consists of costs of idle capacity
& organization-sustaining costs. One particular customer,
Vandal Inc., requested 32 jobs during the...
Cantel Company produces cleaning compounds for both commercial and household customers. Some of these products are...
Cantel Company produces cleaning compounds for both commercial
and household customers. Some of these products are produced as
part of a joint manufacturing process. For example, GR37, a coarse
cleaning powder meant for commercial sale, costs $2.30 a pound to
make and sells for $2.40 per pound. A portion of the annual
production of GR37 is retained for further processing in a separate
department where it is combined with several other ingredients to
form SilPol, which is sold as a...
Cantel Company produces cleaning compounds for both commercial and household customers. Some of these products are...
Cantel Company produces cleaning compounds for both commercial
and household customers. Some of these products are produced as
part of a joint manufacturing process. For example, GR37, a coarse
cleaning powder meant for commercial sale, costs $2.40 a pound to
make and sells for $2.50 per pound. A portion of the annual
production of GR37 is retained for further processing in a separate
department where it is combined with several other ingredients to
form SilPol, which is sold as a...
Cantel Company produces cleaning compounds for both commercial and household customers. Some of these products are...
Cantel Company produces cleaning compounds for both commercial
and household customers. Some of these products are produced as
part of a joint manufacturing process. For example, GR37, a coarse
cleaning powder meant for commercial sale, costs $2.30 a pound to
make and sells for $2.40 per pound. A portion of the annual
production of GR37 is retained for further processing in a separate
department where it is combined with several other ingredients to
form SilPol, which is sold as a...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- A: Provide a numerical example of how Earned Value Management may mislead us as to whether...
- Daryl wishes to save money to provide for his retirement. Beginning one month from now, he...
- L= {w belongs to {0,1}* | the number of 0's is a prime number} . Prove...
- What are Foyal's five management functions? Identify which organizational units accomplish these functions in your airport...
- An air conditioning unit, where water condensation is allowed, cools 9,791 m3 / min of humid...
- how do u calculate value of a bond You consider purchasing $1000 face value 7 year...
- Why am I getting this error using 000webhost , but I do not get this error...
ADVERTISEMENT