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In: Finance
Allergan (AGN): corporate tax rate = 12.5% cost of debt = 3.4867% cost of preferred stock...
Allergan (AGN):
corporate tax rate = 12.5%
cost of debt = 3.4867%
cost of preferred stock = 13.75/161.62 (1-0.055) = 9%
cost of common equity = 8.28%
capital structure =
Total Debt to Total Equity = 40.74
Total Debt to Total Capital = 28.95
Total Debt to Total Assets = 25.41
Interest Coverage = -0.26
Long-Term Debt to Equity = 37.51
Long-Term Debt to Total Capital = 24.87
Long-Term Debt to Assets = 0.22
1) Determine the weighted average cost of capital (WACC) forAllergan (AGN). Create an Excel spreadsheet where you explain how you calculated those numbers and what was your reasoning.
Solutions
Expert Solution
Answer :-
Given
Total Debt to Total Equity = 40.74
Total Debt to Total Capital = 28.95
Total Debt to Total Assets = 25.41
Let assume total Capital is 100 then
if total debt / total capital = 28.95 there fore total debt is 28.95
then total equity is find out by total capital - total debt = 100 - 28.95 = 71.05
then , Total Debt to Total Assets = 25.41 there fore total assets is 28.95/25.41% = 113.93
Long-Term Debt to Total Capital = 24.87 therefore long term debt is 24.87
therefore short term debt is = total debt - long term debt = 28.95-24.87 = 4.08
Long-Term Debt to Equity = 37.51 therefore equity = 24.87/37.51% =
Equity = 66.30
then prefrence share capital is total equity - equity = 71.05 - 66.30 = 4.75
| Column1 | Value | Weights | Cost | Cost after tax | Cost*Weights | |
| Equity | 66.3 | 0.663 | 8.28% | 8.28% | 5.49% | |
| Prefrence | 4.75 | 0.0475 | 9% | 9% | 0.43% | |
| Debt | 28.95 | 0.2895 | 3.49% | 3.05% | 0.88% | |
| total capital | 100 | |||||
| Therefore weighted avg cost of capital = | 6.80% | |||||
jeff jeffy answered 2 years agoRelated Solutions
Allergan (AGN): corporate tax rate = 12.5% cost of debt = 3.4867% cost of preferred stock...
Allergan (AGN):
corporate tax rate = 12.5%
cost of debt = 3.4867%
cost of preferred stock = 13.75/161.62 (1-0.055) = 9%
cost of common equity = 8.28%
capital structure =
Total Debt to Total Equity = 40.74
Total Debt to Total Capital = 28.95
Total Debt to Total Assets = 25.41
Interest Coverage = -0.26
Long-Term Debt to Equity = 37.51
Long-Term Debt to Total Capital = 24.87
Long-Term Debt to Assets = 0.22
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Common stock, no par: 1,250
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