Question
In: Finance
Calculate the weighted average cost of capital for a company given the following: Dividend expected...
Calculate the weighted average cost of capital for a company given the following:
Dividend expected in year one: $1.62/share
Expected dividend growth rate in perpetuity: 3.5%/year
Current market price of company’s common stock: $13.00/share
Company’s debt is in the form of 7-year, 11% (annual) bonds with a face value of $1,000 per bond. Current market value of bonds is $1,058.81/bond
Number of common stocks outstanding: 21,000,000
Market value of debt and equity combined: $420 million
The company’s marginal tax rate: 35%
Calculate the weighted average cost of capital for a company given the following:
Risk-free rate: 3.20%
The market risk premium: 12.40%
Common stock’s beta: 1.35
Company’s debt is in the form of 6-year, 8.6% bonds (semi-annual), face value of $1,000, selling for $946.52.
The company’s finances its needed capital with 30% debt.
The company’s marginal tax rate: 30%
Solutions
jeff jeffy answered 2 years agoRelated Solutions
Calculate the weighted average cost of capital for a company given the following: Dividend expected in...
Calculate the weighted average cost of capital for a
company given the following:
Dividend expected in
year one: $1.62/share
Expected dividend
growth rate in perpetuity: 3.5%/year
Current market price of
company’s common stock: $13.00/share
Company’s debt is in
the form of 7-year, 11% (annual) bonds with a face value of $1,000
per bond. Current market value of bonds is
$1,058.81/bond
Number of common stocks
outstanding: 21,000,000
Market value of debt
and equity combined: $420 million
The company’s marginal
tax rate:...
Calculate the weighted average cost of capital for a company given the following: Risk-free rate:...
Calculate the weighted average cost of capital for a
company given the following:
Risk-free rate: 3.20%
The market risk premium: 12.40%
Common stock’s beta: 1.35
Company’s debt is in the form of 6-year, 8.6% bonds (semi-annual),
face value of $1,000, selling for $946.52.
The company’s finances its needed capital with 30% debt.
The company’s marginal tax rate: 30%
1. Calculate the weighted average cost of capital for a company given the following information: Risk-free...
1. Calculate the weighted average cost of capital for a
company given the following information:
Risk-free rate in the U.S.: 4%
Expected return on the U.S. market portfolio: 14%
Company’s risk relative to the market risk: 0.9
The company has 2-year, 12% bonds (paid semi-annually), face
value of $1,000, selling for $1095.73.
The company’s marginal tax rate: 35%
The company finances 38% of its capital by debt and 62% by
common equity.
2. Calculate the weighted average cost of capital...
Calculate the weighted average cost of capital for a firm with the following information:
Calculate the weighted average cost of capital for a firm with
the following information:
Marginal corporate tax
rate:
25%
Bonds with $1,000 face value with a 6% coupon rate with semi-annual payments matures in 10 years now
sells
for
$928.94
Preferred stock
dividend
$5.50
Preferred stock
price
$55.00Current common stock dividend per
share
$1.50
Price per share of common
stock
$12.00
Floatation cost to sell new common
stock
...
Given the following information, calculate the weighted average cost of capital for Puppet Corporation. (Round intermediate...
Given the following information, calculate the weighted average
cost of capital for Puppet Corporation. (Round intermediate
calculations to 2 decimal places. Round
the final answers to 2 decimal
places.)
Percent of capital
structure:
Debt
40%
Preferred stock
40
Common equity
20
Additional
information:
Bond coupon rate
8.5%
Bond yield
6.25%
Bond flotation cost
2%
Dividend, expected common
$1.50
Price, common
$30.00
Dividend, preferred
6%
Flotation cost, preferred
3%
Flotation cost, common
4.00%
Corporate growth rate
6%
Corporate tax...
Given the following information, calculate the weighted average cost of capital for Puppet Corporation. (Round intermediate...
Given the following information, calculate the weighted average
cost of capital for Puppet Corporation. (Round intermediate
calculations to 2 decimal places. Round the final answers to 2
decimal places.) Percent of capital structure: Debt 45% Preferred
stock 30 Common equity 25 Additional information: Bond coupon rate
8.5% Bond yield 7.50% Bond flotation cost 2% Dividend, expected
common $1.50 Price, common $30.00 Dividend, preferred 7% Flotation
cost, preferred 3% Flotation cost, common 4.00% Corporate growth
rate 5% Corporate tax rate 35%...
Given the following information, calculate the weighted average cost of capital for Puppet Corporation. (Round intermediate...
Given the following information, calculate the weighted average
cost of capital for Puppet Corporation. (Round intermediate
calculations to 2 decimal places. Round
the final answers to 2 decimal
places.)
Percent of capital
structure:
Debt
45%
Preferred stock
30
Common equity
25
Additional
information:
Bond coupon rate
8.5%
Bond yield
7.75%
Bond flotation cost
2%
Dividend, expected common
$1.50
Price, common
$30.00
Dividend, preferred
6%
Flotation cost, preferred
3%
Flotation cost, common
4.00%
Corporate growth rate
6%
Corporate tax...
(A) Please calculate the Weighted Average Cost of Capital (WACC) for the following company. Assumptions: Risk...
(A) Please calculate the Weighted Average Cost of Capital (WACC)
for the following company. Assumptions: Risk free rate = 4.0%;
Company’s spread = 2.0%; Expected return of the market = 9.0%;
Company Beta = 1.10; Company debt to capitalization ratio = 40%;
and Company tax rate = 30%. (Please be sure to show your
calculations.)
(B) Please define and explain the Hurdle Rate. (3 points)
Calculate the weighted average cost of capital for the following firm: it has $600000 in debt,...
Calculate the weighted average cost of capital for the following
firm: it has $600000 in debt, $400000 in common stock and $200000
in preferred stock. It has a 4% cost of debt, 14% cost of common
stock, 12% cost of preferred stock and a 34% tax rate.
Assuming that the company uses the CAPM to calculate its cost of equity. Calculate its weighted average cost of capital.
Royta Ltd, operates in the commercial painting industry. They have reluctantly come to the conclusion that some of their older equipment is reaching the end of its productive life and will need to be replaced sooner or later. They have asked for your assistance in determining their cost of capital in order to make this decision.
Their present capital structure is as follows: 1 200 000 R2 ordinary shares now trading at R2,20 per share.
80 000 preference shares...
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