Question
In: Finance
XYZ company has a capital structure made up of 35 percent debt and 65 percent common...
XYZ company has a capital structure made up of 35 percent debt and 65 percent common equity. Their bonds have a $1,000 par value, a 12 percent coupon, paid semiannually, a current maturity of 20 years, and sell for $1,025. Their beta is 2.2, the risk-free rate is 3 percent, and the market risk premium is 6 percent. The company will pay a dividend of $2.00 next year and these dividends are expected to grow at 5.089% forever. The firm’s stock price is $18.00. The firm's marginal tax rate is 40 percent. Calculate the weighted average cost of capital (WACC).
Solutions
jeff jeffy answered 7 months agoRelated Solutions
Pearson Motors has a target capital structure of 35% debt and 65% common equity, with no...
Pearson Motors has a target capital structure of 35% debt and
65% common equity, with no preferred stock. The yield to maturity
on the company's outstanding bonds is 8%, and its tax rate is 40%.
Pearson's CFO estimates that the company's WACC is 13.10%. What is
Pearson's cost of common equity? Do not round intermediate
calculations. Round your answer to two decimal places.
%
Kahn Inc. has a target capital structure of 65% common equity and 35% debt to fund...
Kahn Inc. has a target capital structure of 65% common equity
and 35% debt to fund its $11 billion in operating assets.
Furthermore, Kahn Inc. has a WACC of 15%, a before-tax cost of debt
of 12%, and a tax rate of 25%. The company's retained earnings are
adequate to provide the common equity portion of its capital
budget. Its expected dividend next year (D1) is $2, and
the current stock price is $32.
a. What is the company's expected...
Kahn Inc. has a target capital structure of 65% common equity and 35% debt to fund...
Kahn Inc. has a target capital structure of 65% common equity
and 35% debt to fund its $8 billion in operating assets.
Furthermore, Kahn Inc. has a WACC of 12%, a before-tax cost of debt
of 11%, and a tax rate of 25%. The company's retained earnings are
adequate to provide the common equity portion of its capital
budget. Its expected dividend next year (D1) is $2, and
the current stock price is $29.
What is the company's expected growth...
has a target capital structure of 65% common equity and 35% debt to fund its $10...
has a target capital structure of 65% common equity and 35% debt
to fund its $10 billion in operating assets. Furthermore, Kahn Inc.
has a WACC of 16%, a before-tax cost of debt of 12%, and a tax rate
of 25%. The company's retained earnings are adequate to provide the
common equity portion of its capital budget. Its expected dividend
next year (D1) is $2, and the current stock price is
$25.
What is the company's expected growth rate? Do...
Kahn Inc. has a target capital structure of 65% common equity and 35% debt to fund...
Kahn Inc. has a target capital structure of 65% common equity
and 35% debt to fund its $10 billion in operating assets.
Furthermore, Kahn Inc. has a WACC of 16%, a before-tax cost of debt
of 12%, and a tax rate of 40%. The company's retained earnings are
adequate to provide the common equity portion of its capital
budget. Its expected dividend next year (D1) is $3, and
the current stock price is $35.
What is the company's expected growth...
Palencia Paints Corporation has a target capital structure of 35% debt and 65% common equity, with...
Palencia Paints Corporation has a target
capital structure of 35% debt and 65% common equity, with no
preferred stock. Its before-tax cost of debt is 8%, and its
marginal tax rate is 40%. The current stock price is
P0$22.00. The last dividend was D0$2.25, and
it is expected to grow at a 5% constant rate. What is its cost of
common equity and its WACC?
Palencia Paints Corporation has a target capital structure of 35% debt and 65% common equity, with...
Palencia Paints Corporation has a target capital structure of
35% debt and 65% common equity, with no preferred stock. Its
before-tax cost of debt is 9%, and its marginal tax rate is 40%.
The current stock price is P0 = $28.50. The last
dividend was D0 = $3.00, and it is expected to grow at a
7% constant rate. What is its cost of common equity and its WACC?
Round your answers to two decimal places. Do not round your...
1. Kramerica Industries has a capital structure consisting of 65% debt and 35% common stock. The...
1. Kramerica Industries has a capital structure consisting of
65% debt and 35% common stock. The company’s CFO has obtained the
following information: o The before-tax YTM on the company's bonds
is 8.5%. o Kramerica will pay a $3.00 dividend on its common stock
and the dividend is expected to grow at a constant rate of 6% a
year. The common stock currently sells for $50 a share. o Assume
the firm will be able to use retained earnings to...
Palencia Paints Corporation has a target capital structure of 35% debt and 65% common equity, with...
Palencia Paints Corporation has a target capital structure of
35% debt and 65% common equity, with no preferred stock. Its
before-tax cost of debt is 9%, and its marginal tax rate is 40%.
The current stock price is P0 = $21.50. The last
dividend was D0 = $2.00, and it is expected to grow at a
6% constant rate. What is its cost of common equity and its WACC?
Round your answers to two decimal places. Do not round your...
Company XYZ has a capital structure that consists of debt, common stocks and preferred stocks. The...
Company XYZ has a capital structure that consists of debt,
common stocks and preferred stocks. The company has issued 15-year,
12% semiannual coupon bond sells for $1,153.72. Its stock currently
pays a $2 dividend per share and the stock’s price is currently
$24.75. The company’s ROE is 15% and retaining 60% of its
earnings.its tax rate is 35%; The weight of debt is 30%, weight of
common equity is 40% and weight of preferred equity is 10%. The
price of...
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