Company XYZ has a capital structure that consists of debt, common stocks and preferred stocks. The...

Company XYZ has a capital structure that consists of debt, common stocks and preferred stocks. The company has issued 15-year, 12% semiannual coupon bond sells for $1,153.72. Its stock currently pays a $2 dividend per share and the stock’s price is currently $24.75. The company’s ROE is 15% and retaining 60% of its earnings.its tax rate is 35%; The weight of debt is 30%, weight of common equity is 40% and weight of preferred equity is 10%. The price of preferred stock is $47.50 a share. The company expects to pay a constant annual dividend of $3.80 a share. What is the company’s WACC?

Solutions

Expert Solution

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

Company ABC has a capital structure that consists solely of debt and common equity. The company...

Company ABC has a capital structure that consists solely of debt and common equity. The company has issued 15-year, 12% semiannual coupon bond sells for $1,153.72. Its stock currently pays a $2 dividend per share and the stock’s price is currently $24.75. The company’s ROE is 15% and paying out 60% of its earnings.its tax rate is 35%; and the company estimates that its WACC is 13.95%. What percentage of the company’s capital structure consists of debt financing?

XYZ company has a capital structure made up of 35 percent debt and 65 percent common...

XYZ company has a capital structure made up of 35 percent debt and 65 percent common equity. Their bonds have a $1,000 par value, a 12 percent coupon, paid semiannually, a current maturity of 20 years, and sell for $1,025. Their beta is 2.2, the risk-free rate is 3 percent, and the market risk premium is 6 percent. The company will pay a dividend of $2.00 next year and these dividends are expected to grow at 5.089% forever. The firm’s...

Your company has a target capital structure of 40% debt, 15% preferred, and 45% common equity....

Your company has a target capital structure of 40% debt, 15% preferred, and 45% common equity. Your bonds carry a 9% coupon, have a par value of $1,000, and 7 years remaining until maturity. They are currently selling for $950.51. The cost of preferred is 7.50%. The risk free rate is 4%, the market risk premium is 8%, and beta is 1.0. The firm will not be issuing any new stock, and the tax rate is 40%. What is its...

Assume that the company has the following capital structure: Debt $15,000,000 Preferred stock $7,500,000 Common stock...

Assume that the company has the following capital structure: Debt $15,000,000 Preferred stock $7,500,000 Common stock $27,500,000 What will be the cost of capital if the company decide to raise the needed capital proportionally and with following costs? Please use the following information to calculate the weighted cost of capital: Bond: A 30-year bond with a face value of $1000 and coupon interest rate of 13% and floatation cost of $20 (Tax is 35%) Preferred stock: Face value of $35...

21-A companyhas a capital structure that consists of $7 million of debt, $2 million of preferred...

21-A companyhas a capital structure that consists of $7 million of debt, $2 million of preferred stock, and $11 million of common equity, based upon current market values. Theyield to maturity on its bonds is 7.4%, and investors require 8% return on the company’spreferred and 14% return on thecommon stock. If the tax rate is 35%, what is thecurrent WACCof this company?

The Happy Company have an optimal capital structure that consists of 40% debt and 60% common equity.

WEIGHTED AVERAGE COST OF CAPITALThe Happy Company have an optimal capital structure that consists of 40% debt and 60% common equity. They expect to have $30,000,000 of new retained earnings available for investment for the next year.• BONDS. Their investment bankers assure them that they could issue $8,000,000 (net of flotation costs) of $1000 face value bonds carrying a 10% coupon rate, paying annual interest, having a 10-year maturity, at a price of $900. Flotation costs for this issue would...

Company has the following target capital structure, in market value terms: Debt 30% Preferred Stock 10% Common...

Company has the following target capital structure, in market value terms: Debt 30% Preferred Stock 10% Common Stock 60% In addition, you know the following: · At present the company’s debt is composed of $1,000 par bonds issued exactly three years ago, that pay a semiannual coupon, with a nominal annual rate of 7%, that have a ten-year maturity, and that are now selling for $1,150. · The company’s preferred stock is paying a $1.50 annual dividend and is currently selling...

The firm's target capital structure is the mix of debt, preferred stock, and common equity the...

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 is used in the firm's WACC calculation. However, if...

The firm's target capital structure is the mix of debt, preferred stock, and common equity the...

Hook Industries's capital structure consists solely of debt and common equity. It can issue debt at...

Hook Industries's capital structure consists solely of debt and common equity. It can issue debt at rd = 9%, and its common stock currently pays a $2.75 dividend per share (D0 = $2.75). The stock's price is currently $29.50, its dividend is expected to grow at a constant rate of 5% per year, its tax rate is 25%, and its WACC is 12.15%. What percentage of the company's capital structure consists of debt? Do not round intermediate calculations. Round your...

Subjects