Question

In: Finance

Sandoz Corporation is estimating its WACC. The company has 50,000 semi-annual bonds outstanding with a 7.5%...

Sandoz Corporation is estimating its WACC. The company has 50,000 semi-annual bonds outstanding with a 7.5% coupon rate, $1,000 par value, 15 years to maturity, selling for 98.1 percent of par. Sandoz has 1 million common shares outstanding, currently selling for $50 per share with a beta of 1.08. In addition, there are 150,000 shares of 8% preferred stock outstanding, currently trading for $100 per share.

The risk-free rate is 3% and the market risk premium is 11%. The marginal tax rate is 35%. Sandoz expects to pay a common share dividend of $4.44 during the next year and plans to increase it at an annual rate of 6% for the foreseeable future.

1. W hat is the firm's pre-tax cost of debt? After-tax cost of debt?

2. What is the firm's cost of preferred stock? Cost of common stock?

3. What is the firm's WACC?

Please show all work!

Solutions

Expert Solution

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

Sandoz Corporation is estimating its WACC. The company has 50,000 semi-annual bonds outstanding with a 7.5%...
Sandoz Corporation is estimating its WACC. The company has 50,000 semi-annual bonds outstanding with a 7.5% coupon rate, $1,000 par value, 15 years to maturity, selling for 98.1 percent of par. Sandoz has 1 million common shares outstanding, currently selling for $50 per share with a beta of 1.08. In addition, there are 150,000 shares of 8% preferred stock outstanding, currently trading for $100 per share. The risk-free rate is 3% and the market risk premium is 11%. The marginal...
Sandoz Corporation is estimating its WACC. The company has 50,000 semi-annual bonds outstanding with a 7.5%...
Sandoz Corporation is estimating its WACC. The company has 50,000 semi-annual bonds outstanding with a 7.5% coupon rate, $1,000 par value, 15 years to maturity, selling for 98.1 percent of par. Sandoz has 1 million common shares outstanding, currently selling for $50 per share with a beta of 1.08. In addition, there are 150,000 shares of 8% preferred stock outstanding, currently trading for $100 per share. The risk-free rate is 3% and the market risk premium is 11%. The marginal...
Wayne Industries currently has 50,000 of its 5% semi-annual coupon bonds outstanding (par value = 1000)....
Wayne Industries currently has 50,000 of its 5% semi-annual coupon bonds outstanding (par value = 1000). The bonds will mature in 19 years and are currently priced at $1,120 per bond. The firm also has an issue of 1.5 million preferred shares outstanding with a market price of $30.00. The preferred shares offer an annual dividend of $2.40. Wayne Industries also has 4.5 million shares of common stock outstanding with a price of $17.50 per share. The firm is expected...
Heron Manufacturing (HM) has 50,000 bonds outstanding with a 7.0% per year coupon rate (with semi-annual...
Heron Manufacturing (HM) has 50,000 bonds outstanding with a 7.0% per year coupon rate (with semi-annual coupon payments) and 10 years left to maturity. The bonds have a face value of $1,000 and currently sell for $982 per bond. HM's common stock has a beta of 1.2. The 10-year Treasury-Bond rate is currently 2.6%, and historically, the market has earned 6% more per year than the 10-year Treasury rate. HM has 4 million shares of common stock outstanding at a...
AB Corporation currently has 40,000 of its 9.5% semi-annual coupon bonds outstanding (Par value = $1,000)....
AB Corporation currently has 40,000 of its 9.5% semi-annual coupon bonds outstanding (Par value = $1,000). The bonds will mature in 20 years and are currently priced at $1,280 per bond. The company has an issue of 1.2 million preferred shares outstanding with a market price of $10.95. The preferred shares offer an annual dividend of $1.05. The company also has 2.5 million shares of common stock outstanding with a price of $26.00 per share. The company is expected to...
AB Corporation currently has 40,000 of its 9.5% semi-annual coupon bonds outstanding (Par value = $1,000)....
AB Corporation currently has 40,000 of its 9.5% semi-annual coupon bonds outstanding (Par value = $1,000). The bonds will mature in 20 years and are currently priced at $1,280 per bond. The company has an issue of 1.2 million preferred shares outstanding with a market price of $10.95. The preferred shares offer an annual dividend of $1.05. The companyalso has 2.5 million shares of common stock outstanding with a price of $26.00 per share. The company is expected to pay...
A company has 300,000 bonds outstanding that make semi-annual coupon payments currently trading at $1,010, with...
A company has 300,000 bonds outstanding that make semi-annual coupon payments currently trading at $1,010, with a 8% coupon rate and 15 years to maturity. In addition, the company has a current stock price of $54, five million shares outstanding, a 35% tax rate, a beta of 0.85, a risk-free rate of 2%, and an expected market return of 9%. What is the weighted average cost of capital (WACC)?
LUVFINANCE, Inc. is estimating its WACC. It is operating at its optimal capital structure. Its outstanding...
LUVFINANCE, Inc. is estimating its WACC. It is operating at its optimal capital structure. Its outstanding bonds have a 12 percent coupon, paid semiannually, a current maturity of 17 years, and sell for $1,162.   It has 100,000 bonds outstanding. The firm can issue new 20-year maturity semiannual bonds at par but will incur flotation costs of $50 per bond (Hint: the coupon rate on the new bonds = the YTM on existing bonds). The firm could sell, at par, $100...
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...
Jallouk Corporation has two different bonds currently outstanding. Bond M has a face value of $50,000...
Jallouk Corporation has two different bonds currently outstanding. Bond M has a face value of $50,000 and matures in 20 years. The bond makes no payments for the first six years, then pays $2,600 every six months over the subsequent eight years, and finally pays $2,900 every six months over the last six years. Bond N also has a face value of $50,000 and a maturity of 20 years; it makes no coupon payments over the life of the bond....
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT