A corporation has a total capital of $10,000,000 by issuing shares of stock worth $6,000,000, and...

A corporation has a total capital of $10,000,000 by issuing shares of stock worth $6,000,000, and by floating bonds worth $4,000,000. If the cost of debt is 8% and cost of equity is 14%, what is the weighted average cost of capital in the absence of corporate tax.

Expert Solution

Weight of debt = 4,000,000/10,000,000 = 40%

Weight of equity = 6,000,000/10,000,000 = 60%

WACC = 40% * 8% * (1 - 0%) + 60% * 14% = 3.2% + 8.40% = 11.60%

jeff jeffy answered 2 years ago

Titan Mining Corporation, Inc. is capitalized with 10,000,000 shares of common stock, 1,000,000 shares of preferred...

Titan Mining Corporation, Inc. is capitalized with 10,000,000 shares of common stock, 1,000,000 shares of preferred stock, and 800,000 5.50% ($1,000 par) coupon bonds, paid semiannually. The bonds have 8 years left until maturity and are trading for 93% of par. The common stock currently sells for $40.72 per share and has a beta of 1.25. The company recently paid a common stock dividend of $4.35 per share, and such dividend is expected to grow at a rate of 4%,...

You will provide the journal entry to record issuing of common stock shares by a corporation,...

You will provide the journal entry to record issuing of common stock shares by a corporation, record issuing of cumulative preferred stock, and record a declaration of stock split. Part 1: Company A During 2018, Company A has the following transactions involving its common and preferred stock: Issued 20,000 shares of $8 par common stock for $26 a share; brings total shares outstanding to 50,000 shares Issued 6,000 shares of $100 par, 6%, cumulative preferred stock for $150 per share...

Explain the accounting procedures for issuing shares of stock?

Benn, Incorporated, has 6,000,000 shares of common stock outstanding on December 31, 2017. An additional 1,000,000...

Benn, Incorporated, has 6,000,000 shares of common stock outstanding on December 31, 2017. An additional 1,000,000 shares of common stock were issued on April 1, 2018, and 500,000 more on July 1, 2018. On October 1, 2018, Benn declared a 10% stock dividend. On November 1, Benn purchased 120,000 of its own stock. What was the number of shares to be used in computing basic earnings per share? SHOW ALL COMPUTATIONS.

If total assets of Brooks Corporation are $100,000, total liabilities are $17,000, and capital stock is...

If total assets of Brooks Corporation are $100,000, total liabilities are $17,000, and capital stock is $20,000, how much are the retained earnings of Brooks Corporation?

Thorn Corporation acquired 100 percent of the stock of Byrd Company by issuing 10,000 new shares...

Thorn Corporation acquired 100 percent of the stock of Byrd Company by issuing 10,000 new shares for exchange. The par-value per share is $10 and the market value per share is $120. Summarized balance sheet information for the two companies immediately preceding the acquisition is as follows: Thorn Byrd Cash and Receivables 1,200,000 420,000 Inventory 40,000 470,000 Land 120,000 100,000 Buildings and Equipment (net) 2,460,000 220,000 Bond Investments 700,000 Total Assets 4,520,000 1,210,000 Accounts and Notes Payable 820,000 220,000 Common...

TacosRus has decided to raise $6.665 million in the capital by issuing 500,000 new shares of...

TacosRus has decided to raise $6.665 million in the capital by issuing 500,000 new shares of common stock in a rights offering. Currently, there are 1.5 million shares outstanding. What will each current shareholder have to provide to purchase one share of this new offering?

A firm's balance sheet has the following entries: Cash $ 6,000,000 Total liabilities 25,000,000 Common stock...

A firm's balance sheet has the following entries: Cash $ 6,000,000 Total liabilities 25,000,000 Common stock ($5 par; 3,000,000 shares outstanding) 15,000,000 Additional paid-in capital 3,000,000 Retained earnings 40,000,000 What will be each of these balance sheet entries after: a two-for-one stock split? Round the par value to the nearest cent, the number of shares outstanding to the nearest whole number, and the other answers to the nearest dollar. Cash $ Total liabilities $ Common stock ($ par; shares outstanding)...

Comstock Inc. has 10,000,000 outstanding shares of common stock with a market price of $30 per...

Comstock Inc. has 10,000,000 outstanding shares of common stock with a market price of $30 per share. The Risk Free Rate is 5%, and the market portfolio offers an expected return of 14%. The equity beta of Comstock common stock is 1.45. Comstock also has a number of outstanding bonds that gives altogether $100,000,000 in face value. These bonds have 10 % annual coupon, ten years left to maturity and a market YTM of 7%. The firm has a tax...

Very Busy Airlines has the following capital structure: Debt $50,000,000 Preferred Stock $10,000,000...

Very Busy Airlines has the following capital structure: Debt $50,000,000 Preferred Stock $10,000,000 Common Stock $40,000,000 Additional info: Yield to maturity (bonds) 10% Price of preferred stock $55 Price of common stock $30 Preferred dividend $10 Common dividend $3 Flotation cost, preferred $5 Growth rate of dividends 5% The firm’s tax rate is 40%. Compute the firm’s weighted average cost of capital [WACC]. (10) [Hint: First compute weights for debt, preferred...

Question