Question
In: Finance
To estimate the company's WACC Marshall, Inc. recently hired you as a consultant. You have obtained...
To estimate the company's WACC Marshall, Inc. recently hired you as a consultant. You have obtained the following information. (1) The firm's noncallable bonds mature in 20 years, have an 8% annual coupon, a par value of $1000, and a market price of $1050. (2) The company's tax rate is 40%. (3) The risk rate is 4.50%, the market risk premium is 5.50%, and the stocks beta is 1.20. (4) The target capital structure consists of 35% debt and the balance is common equity. The firm uses CAPM to estimate the cost of common stock, and it does not expect to issue any new shares. What is it's WACC? a. 8.35% b. 8.79% c. 7.54% d. 7.93%
Solutions
jeff jeffy answered 2 years agoRelated Solutions
To estimate the company's WACC, Marshall Inc. recently hired you as a consultant. You have obtained...
To estimate the company's WACC, Marshall Inc. recently hired you
as a consultant. You have obtained the following information. (1)
The firm's noncallable bonds mature in 20 years, have an 9.00%
annual coupon, a par value of $1,000, and a market price of
$950.00. (2) The company's tax rate is 30%. (3) The risk-free rate
is 2.50%, the market risk premium is 4.50%, and the stock's beta is
1.20. (4) The target capital structure consists of 35% debt and the...
To estimate the company's WACC, Marshall Inc. recently hired you as a consultant. You have obtained...
To estimate the company's WACC, Marshall Inc. recently hired
you as a consultant. You have obtained the following
information.
(1) The firm's existing noncallable
bonds which mature in 40 years, have an 5.00% annual coupon, a par
value of $1,000, and a market price of $950. You have done some
research and estimate the cost of issuing additional debt would
cost you similarly to the existing bonds.
(2) The company's current tax rate is
40%, but the tax rate is...
Daves Inc. recently hired you as a consultant to estimate the company's WACC. You have obtained...
Daves Inc. recently hired you as a consultant to estimate the
company's WACC. You have obtained the following information. (1)
The firm's noncallable bonds mature in 20 years, have an 8.00%
annual coupon, a par value of $1,000, and a market price of
$1,000.00. (2) The company's tax rate is 25%. (3) The risk-free
rate is 4.50%, the market risk premium is 5.50%, and the stock's
beta is 1.20. (4) The target capital structure consists of 35% debt
and the...
Daves Inc. recently hired you as a consultant to estimate the company's WACC. You have obtained...
Daves Inc. recently hired you as a consultant to estimate the
company's WACC. You have obtained the following information. (1)
The firm's noncallable bonds mature in 20 years, have an 8.00%
annual coupon, a par value of $1,000, and a market price of
$1,225.00. (2) The company's tax rate is 40%. (3) The risk-free
rate is 4.50%, the market risk premium is 5.50%, and the stock's
beta is 1.20. (4) The target capital structure consists of 35% debt
and the...
Brooker Inc. recently hired you as a consultant to estimate the company’s WACC. You have obtained...
Brooker Inc. recently hired you as a consultant to estimate the
company’s WACC. You have obtained the following information. (1)
The firm's bonds mature in 20 years, have an 8.00% annual coupon, a
par value of $1,000, and a market price of $1,050.00. (2) The
company’s tax rate is 40%. (3) The risk-free rate is 4.50%, the
market risk premium is 5.50%, and the stock’s beta is 1.20. (4) The
target capital structure consists of 35% debt and 65% common...
London Inc. recently hired you as a consultant to estimate the company’s WACC. You have obtained...
London Inc. recently hired you as a consultant to estimate the
company’s WACC. You have obtained the following information.
• The firm has $400,000 of debt outstanding, $200,000 of preferred
stock, $300,000 of retained earnings and $300,000 of new common
stock.
• The firm’s bonds mature in 20 years and have a 10% yield to
maturity.
• The company’s tax rate is 40%.
• The firm’s preferred stock currently sells for $80 a share and
pays an annual dividend of...
Daves Inc. recently hired you as a consultant to estimate the company’s WACC. You have obtained...
Daves Inc. recently hired you as a consultant to estimate the
company’s WACC. You have obtained the following information. (1)
The firm's noncallable bonds mature in 20 years, have an 8.00%
annual coupon, a par value of $1,000, and a market price of
$1,175.00. (2) The company’s tax rate is 40%. (3) The risk-free
rate is 4.50%, the market risk premium is 5.50%, and the stock’s
beta is 1.20. (4) The target capital structure consists of 35% debt
and the...
Shener Inc. recently hired you as a consultant to estimate the company’s WACC. You have obtained...
Shener Inc. recently hired you as a consultant to estimate the
company’s WACC. You have obtained the following information. (1)
The firm's noncallable bonds mature in 30 years, have an 7.00%
annual coupon, a par value of $1,000, and a market price of
$1,200.00. (2) The company’s tax rate is 21%. (3) The risk-free
rate is 3.20%, the market risk premium is 5.50%, and the stock’s
beta is 2.20. (4) The target capital structure consists of 35% debt
and the...
Daves Inc. recently hired you as a consultant to estimate the company’s WACC. You have obtained...
Daves Inc. recently hired you as a consultant to estimate the
company’s WACC. You have obtained the following information. (1)
The firm's noncallable bonds mature in 20 years, have an 8.00%
annual coupon, a par value of $1,000, and a market price of
$1,075.00. (2) The company’s tax rate is 40%. (3) The risk-free
rate is 4.50%, the market risk premium is 5.50%, and the stock’s
beta is 1.20. (4) The target capital structure consists of 35% debt
and the...
Angel Inc. recently hired you as a consultant to estimate the company’s WACC. You have obtained...
Angel Inc. recently hired you as a consultant to estimate the
company’s WACC. You have obtained the following information. (1)
The firm's noncallable bonds mature in 20 years, have an 8.00%
annual coupon, a par value of $1,000, and a market price of
$1,225.00. (2) The company’s tax rate is 40%. (3) The risk-free
rate is 4.50%, the market risk premium is 5.50%, and the stock’s
beta is 1.20. (4) The target capital structure consists of 35% debt
and the...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- What is the Rawls' solution to the age-old question of social (economic / distributive) justice?...
- St. Johns River Shipyards' welding machine is 15 years old, fully depreciated, and has no salvage...
- The following information is available for Robstown Corporation for 20Y8: Inventories January 1 December 31 Materials...
- /* Complete the TO DO comments below */ window.onload = function() { /* TODO add a...
- Trevor Price bought 10-year bonds issued by Harvest Foods five years ago for $4,532.35. The bonds...
- How do you represent 5.1 (5 + 1/10) in binary? I know that it is 0101....
- More and more adults are considering commuting to work by bicycle rather than car, but few...
ADVERTISEMENT