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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.

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 ago

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Allergan (AGN): corporate tax rate = 12.5% cost of debt = 3.4867% cost of preferred stock...

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