Question
In: Finance
An analyst has collected the following information regarding Christopher Co.: · The company's capital structure is...
An analyst has collected the following information regarding
Christopher Co.:
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The company's capital structure is 70 percent equity, 30 percent debt. |
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· |
The yield to maturity on the company's bonds is 8 percent. |
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· |
The company's year-end dividend (D1) is forecasted to be $1.1 a share. |
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· |
The company expects that its dividend will grow at a constant rate of 5 percent a year. |
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· |
The company's stock price is $25. |
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The company's tax rate is 40 percent. |
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The company anticipates that it will need to raise new common stock this year. Its investment bankers anticipate that the total flotation cost will equal 10 percent of the amount issued. Assume the company accounts for flotation costs by adjusting the cost of capital. |
Given this information, calculate the company's WACC in percentage.
Round it to two decimal places.
Solutions
jeff jeffy answered 8 months agoRelated Solutions
1A. An analyst has collected the following information regarding Christopher Co.: · The company's capital structure...
1A. An analyst has collected the following information regarding
Christopher Co.: · The company's capital structure is 70 percent
equity, 30 percent debt. · The yield to maturity on the company's
bonds is 4 percent. · The company's year-end dividend (D1) is
forecasted to be $1.0 a share. · The company expects that its
dividend will grow at a constant rate of 4 percent a year. · The
company's stock price is $25. · The company's tax rate is 40...
An analyst has collected the following information regarding Christopher Co.: • The company’s capital structure is...
An analyst has collected the following information regarding
Christopher Co.:
• The company’s capital structure is 70 percent equity, 30
percent debt.
• The yield to maturity on the company’s bonds is 9 percent.
• The company’s year-end dividend is forecasted to be $0.80 a
share.
• The company expects that its dividend will grow at a constant
rate of 9 percent a year.
• The company’s stock price is $25.
• The company’s tax rate is 40 percent.
•...
The following is information regarding the capital structure of Wind Industries: - Capital structure consists of...
The following is information regarding the capital structure of
Wind Industries:
- Capital structure consists of a single long-term debt issue
with a face value of $20 million and 2 million common shares with a
current market price of $15 per share
- The long-tern debt issue carries a coupon rate of 5% with
interest paid semi-annually. It has 8 years remaining until
maturity and a current market yield of 6%, also based on semi
annual compounding.
- The common...
Information has been collected regarding Black Company's asset group that includes Goodwill. Black company follows ASPE....
Information has been collected regarding Black Company's asset
group that includes Goodwill. Black company follows ASPE. At
December 31st, 2015, the assets of the Black company's asset group
are shown as follows (in millions of dollars) on the company's
balance sheet:
Cost
Accumulated
Depreciation
Net Book
Value
Current Assets
$300
n/a
300
Goodwill
$400
n/a
400
Equipment
$1,400
800
600
Buildings
$2,100
600
1,500
Patent Rights
$200
80
$120
TOTAL ASSETS
$4,400
$1,480
$2,920
Liabilities
($520)
($520)
The fair values/recoverable...
Information has been collected regarding Black Company's asset group that includes Goodwill. Black company follows ASPE....
Information has been collected regarding Black Company's asset
group that includes Goodwill. Black company follows ASPE. At
December 31st, 2015, the assets of the Black company's asset group
are shown as follows (in millions of dollars) on the company's
balance sheet:
Cost
Accumulated
Depreciation
Net Book
Value
Current Assets
$300
n/a
300
Goodwill
$400
n/a
400
Equipment
$1,400
800
600
Buildings
$2,100
600
1,500
Patent Rights
$200
80
$120
TOTAL ASSETS
$4,400
$1,480
$2,920
Liabilities
($520)
($520)
The fair values/recoverable...
An analyst has compiled the following information regarding Rubsam, Inc. Liabilities at year - end €...
An analyst has compiled the following information
regarding Rubsam, Inc. Liabilities at year - end € 1,000
Contributed capital at year - end €500 Beginning retained earnings
€ 600 Revenue during the year € 5,000 Expenses during the year €
4,300 There have been no distributions to owners. The analyst ’ s
most likely estimate of total assets at year - end should be
closest to
(1 Point)
€ 2,100.
€ 2,300
€ 2,800
3.On 30 April 2006, Pinto
Products...
Below is information regarding the capital structure of Micro Advantage Inc. On the basis of this...
Below is information regarding the capital structure of Micro
Advantage Inc. On the basis of this information you are asked to
respond to the following three questions:
Required:
1. Micro Advantage issued a $5,100,000 par value, 18-year bond a
year ago at 97 (i.e., 97% of par value) with a stated rate of 8%.
Today, the bond is selling at 105 (i.e., 105% of par value). If the
firm’s tax bracket is 20%, what is the current after-tax cost of...
A firm has the following capital structure. Assume the company's tax rate is 25% Debt: the...
A firm has the following capital structure. Assume the company's
tax rate is 25%
Debt: the firm has 5,000 6% coupon bonds outstanding $1000 par
value, 11 years to maturity selling for 103 percent of par: the
bonds make semiannual payments.
Common Stock: The firm has 375000 shares outstanding, selling
for $65 per share; the beta is 1.08
Preferred Stock: The firm has 15,000 shares of 5% preferred
stock outstanding, currently selling for $75 per share.
There is currently a...
a firm has a capital structure of 100% equity. An analyst has estimated the firm's beta...
a firm has a capital structure of 100% equity. An analyst has
estimated the firm's beta as 1.20, and current market conditions
feature a risk free rate of 2%, and a market portfolio risk premium
of 6%. The firm is considering the following project: Invest $60
million today , The project will have a cash flow of $5 million in
the first year, and cash flow will grow by 5% each year for a
20-year period.
A consultant has collected the following information regarding a company: Total Assets= 4,000 Million Tax Rate=...
A consultant has collected the following information regarding a
company:
Total Assets= 4,000 Million
Tax Rate= 40%
Operating Income (EBIT)= 800 Million
Debt Ratio= 0%
Interest expense= 0 Million
WACC (return on asset)= 10%
Net Income= 480 Million
EPS=Dividend= $4.50
Share Price= $40
The company has no growth opportunities (g=0), so the company
pays out all of its earnings as dividends (EPS=DPS). The stock
price can be calculated by simply dividing earnings per share by
the required rate of return...
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