Question
In: Finance
(Weighted average cost of capital) The capital structure for the Carion Corporation is provided here:The company...
(Weighted average cost of capital) The capital structure for the Carion Corporation is provided here:The company plans to maintain its debt structure in the future. If the firm has an after-tax cost of debt of 5.3 percent, a cost of preferred stock of 13.5 percent, and a cost of common stock of 18.6 percent, what is the firm's weighted average cost of capital?
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CAPITAL STRUCTURE ($000) |
|||
|
Bonds |
$1,095 |
||
|
Preferred stock |
279 |
||
|
Common stock |
3,633 |
||
|
$5,007 |
|||
Solutions
jeff jeffy answered 6 months agoRelated Solutions
The Cost of Capital: Weighted Average Cost of Capital The firm's target capital structure is the...
The Cost of Capital: Weighted Average Cost of Capital
The firm's target capital structure is the mix of debt,
preferred stock, and common equity the firm plans to raise funds
for its future projects. The target proportions of debt, preferred
stock, and common equity, along with the cost of these components,
are used to calculate the firm's weighted average cost of capital
(WACC). If the firm will not have to issue new common stock, then
the cost of retained earnings...
I. Explain the meaning of capital structure, cost of capital, and weighted average cost of capital...
I. Explain the meaning of capital structure, cost of capital,
and weighted average cost of capital (WACC).
II. Describe how capital structure and cost of capital affect
the way that a company is valued by investors.
III. Utilize vocabulary and explanations suitable for a
non-expert in finance to understand the communication.
The weighted average cost of capital (WACC) is an important tool for the capital structure. Go...
The weighted average cost of capital (WACC) is an
important tool for the capital structure. Go to the website Yahoo!
Industry Summary and look at Facebook Inc. and Alphabet Inc.
Calculate the WACC for the two firms. How do the WACCs compare? Are
the WACCs what you would expect? What causes the differences
between the two firms’ WACCs?
Define the Average Cost of Capital (Weighted Average Cost of Capital) and explain why a company...
Define the Average Cost of Capital (Weighted Average Cost of
Capital) and explain why a company should earn at least its
weighted average cost of capital in new investments.
What are the financial implications if it does not?
The weighted average cost of capital is determined by _____ the weighted average cost of equity....
The weighted average cost of capital is determined by _____ the
weighted average cost of equity.
a. multiplying the weighted average aftertax cost of debt by
b. adding the weighted average pretax cost of debt to
c. adding the weighted average aftertax cost of debt to
d. dividing the weighted average pretax cost of debt by
e. dividing the weighted average aftertax cost of debt by
The weighted average cost of capital (WACC) is calculated as the weighted average of cost of...
The weighted average cost of capital (WACC) is calculated as
the weighted average of cost of component capital, including debt,
preferred stock and common equity. In general, debt is less
expensive than equity because it is less risky to the investors.
Some managers may intend to increase the usage of debt, therefore
increase the weight on debt (Wd). Do you think by
increasing the weight on debt (Wd) will reduce the WACC
infinitely? What are the benefits and costs of...
(Weighted Average Cost of Capital) AnimalKing has a capital structure with 30% debt and 70% common...
(Weighted Average Cost of Capital) AnimalKing has a capital
structure with 30% debt and 70% common stock. A debt issue of
$1,000 face value with 12% coupon bonds, maturing in 15 years
paying semiannual interest, will sell for $1,122.35. The cost of
equity for the company is based on the CAPM and the following
information: beta of 1.1, risk free treasury rate of 3% and market
rate of 9%. What is AnimalKing’s cost of capital given a 20% tax
rate?
Cochran Corporation has a weighted average cost of capital of 11% for projects of average risk.Projects...
Cochran Corporation has a weighted average cost of capital of
11% for projects of average risk.Projects of below average risk
have a cost of capital of 9% , while projects of above risk have a
cost of capital equal to 13%.Projects A and B are
mutually exclusive,whereas all other projects are
independent.None of the projects will be repeated.The following
table summarizes the cash flows, IRRs and risk levels of the
projects.Which projects will the firm select for investment using
both...
What is Weighted Average Cost of Capital?
What is Weighted Average Cost of Capital?
Estimating Cost of Equity Capital and Weighted Average Cost of Capital
Estimating Cost of Equity Capital and Weighted Average Cost of Capital
The December 31, 2015, partial financial statements taken from the annual report for AT&T Inc. (T ) follow.
Consolidated Statements of Income
Dollars in millions except per share amounts
2015
2014
Operating revenues
Service
$ 131,677
$ 118,437
Equipment
15,124
14,010
Total operating revenues
146,801
132,447
Operating expenses
Equipment
19,268
18,946
Broadcast, programming and operations
11,996
4,075
Other cost of services (exclusive of depreciation and...
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