1.Rollins Corporation is estimating its WACC. Its target capital structure is 20 percent debt, 20 percent...

1.Rollins Corporation is estimating its WACC. Its target capital structure is 20 percent debt, 20 percent preferred stock, and 60 percent common equity. Rollins' beta is 1.6 , the risk-free rate is 3 percent, and the market risk premium is 5 percent. Rollins is a constant-growth firm which just paid a dividend of $2.00, sells for $ 29 per share, and has a growth rate of 4 percent. The firm's policy is to use a risk premium of 3 percentage points when using the bond-yield-plus-risk-premium method to find r_s. The firm's marginal tax rate is 33 percent.
What is Rollins cost of equity when using the CAPM approach? Express your answer in percentage (without the % sign) and round it to two decimal places.

2.A company's balance sheets show a total of $ 25 million long-term debt with a coupon rate of 12 percent. The yield to maturity on this debt is 8.72 percent, and the debt has a total current market value of $ 32 million. The balance sheets also show that that the company has 10 million shares of stock; the total of common stock and retained earnings is $30 million. The current stock price is $7.5 per share. The current return required by stockholders, r_s, is 12 percent. The company has a target capital structure of 40 percent debt and 60 percent equity. The tax rate is 40%. What weighted average cost of capital should you use to evaluate potential projects? Express your answer in percentage (without the % sign) and round it to two decimal places.

Expert Solution

ANSWER 1 : 11.00

ANSWER 2 : 9.29

jeff jeffy answered 7 months ago

Rollins Corporation is estimating its WACC. Its target capital structure is 20 percent debt, 20 percent...

Rollins Corporation is estimating its WACC. Its target capital structure is 20 percent debt, 20 percent preferred stock, and 60 percent common equity. Its bonds have a 7.5 percent coupon, paid semiannually, a current maturity of 20 years, and sell for $1,105.78. The firm could sell, at par, $100 preferred stock which pays a 8 percent annual dividend, but flotation costs of 5 percent would be incurred. Rollins' beta is 1.8, the risk-free rate is 2.45 percent, and the market...

Lipscomb Corporation is estimating its WACC. Its target capital structure is 20 percent debt, 20 percent...

Lipscomb Corporation is estimating its WACC. Its target capital structure is 20 percent debt, 20 percent preferred stock, and 60 percent common equity. Its bonds have a 12 percent coupon, paid semiannually, a current maturity of 20 years, and sell for 1,000 USD. The firm could sell, at par, 100 USD preferred stock which pays a 12 percent annual dividend, but flotation costs of 5 percent would be incurred. Libscomb is a constant-growth firm which just paid a dividend of...

Preston Corp. is estimating its WACC. Its target capital structure is 20 percent debt, 20 percent...

Preston Corp. is estimating its WACC. Its target capital structure is 20 percent debt, 20 percent preferred stock, and 60 percent common equity. Its bonds have a 12 percent coupon, paid semiannually, a current maturity of 20 years, and sells for $1,100. The firm could sell, at par, $100 preferred stock which pays a 4.89 percent annual dividend, but flotation costs of 5 percent would be incurred. Preston's beta is 1.2, the risk-free rate is 3 percent, and the market...

G Corporation is estimating its WACC. Its target capital structure is 20% debt, 20% preferred stock,...

G Corporation is estimating its WACC. Its target capital structure is 20% debt, 20% preferred stock, and 60% common equity. Its bonds have a 10% coupon, paid semiannually, a current maturity of 20 years, and sell for $850. The firm could sell, at par, $100 preferred stock which pays a 12% annual dividend. Greshak's beta is 1.2, the risk-free rate is 10%, and the market risk premium is 5%. The firm's marginal tax rate is 40%. What is the company’s...

Your company is estimating its WACC. Its target capital structure is 30 percent debt, 10 percent...

Your company is estimating its WACC. Its target capital structure is 30 percent debt, 10 percent preferred stock, and 60 percent common equity. Its bonds have an 8 percent coupon, paid quarterly, a current maturity of 15 years, and sell for $895. The firm could sell, at par, $100 preferred stock which pays $10 annual dividend, but flotation costs of 5 percent would be incurred if the company will issue new preferred stocks. This company’s beta is 1.3, the risk-free...

Rollins Corporation’s target capital structure is 20 percent debt, 20 percent preferred stock, and 60 percent...

Rollins Corporation’s target capital structure is 20 percent debt, 20 percent preferred stock, and 60 percent common equity. Its bonds have a 12 percent coupon, paid semiannually, a current maturity of 20 years, and sell for $1,200 in the market now. The price of firm’s newly issued preferred stock is $100 and the flotation cost is 5 percent. The company pays an annual dividend of $12 to its preferred stockholders. Rollins' beta is 1.2, the risk‑free rate is 10 percent,...

What is the company’s after-tax cost of debt? Rollins Corporation is estimating its WACC. Its target...

What is the company’s after-tax cost of debt? Rollins Corporation is estimating its WACC. Its target capital structure What is the company’s cost of preferred equity? premium is 5 percent. The firm's marginal tax rate is 40 percent. What is the company’s cost of common equity?

Resources Corporation is estimating its WACC. Its target capital structure is 40% debt, 10% preferred stock,...

Resources Corporation is estimating its WACC. Its target capital structure is 40% debt, 10% preferred stock, and 50% common equity. Its bonds have an 8% coupon rate, paid semi-annually, a current maturity of 12 years, and sell for $1,080.29. The firm could sell, at par, $100 preferred stock which pays a 6.75% annual dividend (assume no flotation costs). Resources’ beta is 1.6, the risk-free rate [rRF] is 3%, and the market risk premium [RPM] is 5%. Resources is a constant-growth...

Mullineaux Corporation has a target capital structure of 75 percent common stock and 25 percent debt....

Mullineaux Corporation has a target capital structure of 75 percent common stock and 25 percent debt. Its cost of equity is 11.5 percent, and the cost of debt is 6.2 percent. The relevant tax rate is 25 percent. What is the company’s WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

can you use excel Rollins Corporation is estimating its WACC. Its only bond issue has a 6.07...

can you use excel Rollins Corporation is estimating its WACC. Its only bond issue has a 6.07 percent annual yield to maturity, par value of $1,000, mature in 20 years, and has a 5.2% coupon paid semiannually (2.6%). There is $100 million total par value of debt outstanding. The firm currently has a $100 par preferred stock that pays a 7.5 percent annual dividend and currently yields 6 percent. Flotation costs of 5 percent must be incurred on any new issue of preferred. Current outstanding...

Question