Google currently has a 5 million common shares outstanding, and a 1 million preferred shares outstanding,...

Google currently has a 5 million common shares outstanding, and a 1 million preferred shares outstanding, and 100,000 bonds outstanding. Calculate Google Weighted Average Cost of Capital (WACC) if the corporate tax rate is 35%. (Using excel and making formulas viewable)

The average cost of equity of Google is 19.04%.

The cost of Google’s preferred stocks if it is currently priced at $100 is 6%.

The pre-tax cost of debt of Google is 6.85%.

Expert Solution

WACC = Cost of Equity * %Equity + Cost of Debt * (1 - tax rate) * %Debt + Cost of Preferred Stock * %Preferred Stock

Particular	No. of Shares/Bonds	%Cost	Calculation	WACC (%)
Common Shares	5,00,000	19.04%	19.04% * (500,000/700,000)	13.60
Preferred Stock	1,00,000	6.00%	6% * (100,000/700,000)	0.86
Bonds	1,00,000	6.85%	6.85% * (1 - 0.35) * (100,000/700,000)	0.64
	7,00,000		WACC	15.09

Therefore, WACC is 15.09%

jeff jeffy answered 1 year ago

Edited: To add missing information. #6 Google currently has a 5 million common shares outstanding, and...

Edited: To add missing information. #6 Google currently has a 5 million common shares outstanding, and a 1 million preferred shares outstanding, and 100,000 bonds outstanding. Use your answers in #3, #4, and #5 to calculate Google Weighted Average Cost of Capital (WACC) if the corporate tax rate is 35%. Needed information for #6 #3 = As a financial analyst, you know that both DGM and the CAPM used in # 1 and # 2 above can be inaccurate, so...

Titan Mining Corporation has 8 million shares of common stock outstanding, 5 million shares of preferred...

Titan Mining Corporation has 8 million shares of common stock outstanding, 5 million shares of preferred stock outstanding, and 100,000 units of 9 percent semiannual bonds outstanding, par value $1,000 each. The preferred stock pays a dividend of $6 per share. The common stock currently sells for $32 per share and has a beta of 1.15, the preferred stock currently sells for $67 per share, and the bonds have 15 years to maturity and sell for 91 percent of par....

Titan Mining Corporation has 8 million shares of common stock outstanding, 5 million shares of preferred...

Titan Mining Corporation has 8 million shares of common stock outstanding, 5 million shares of preferred stock outstanding, and 100,000 units of 9 percent semiannual bonds outstanding, par value $1,000 each. The preferred stock pays a dividend of $6 per share. The common stock currently sells for $32 per share and has a beta of 1.15, the preferred stock currently sells for $67 per share, and the bonds have 15 years to maturity and sell for 91 percent of par....

Fairyland Inc. has 4 million shares of common stock outstanding, 1 million shares of preferred stock...

Fairyland Inc. has 4 million shares of common stock outstanding, 1 million shares of preferred stock outstanding, and 200 thousand bonds. The common shares are selling for $25 per share, the preferred share are selling for $10 per share, and the bonds are selling for 95 percent of their $1,000 par. (See P10-3 for formula to calculate weights). A. What would be the weight used for equity in the computation of FarCry’s WACC? B. What weight should you use for...

ABC Corporation has 1/2 million shares of common stock outstanding, 1 million shares of preferred stock,...

ABC Corporation has 1/2 million shares of common stock outstanding, 1 million shares of preferred stock, and 20,000 4.5% semiannual bonds outstanding. The common stock has a beta of 1.2. The corporate bond has a par value of $1,000 each and matures in 21 years. Currently the bonds are selling at 104% of their face values. The market risk premium is 10%. The risk-free rate is 2.5%. The common stock sells for $75 per share. The preferred stock sells for...

Anderson Corporation has 1 million shares of common stock outstanding, 1/2 million shares of preferred stock,...

Anderson Corporation has 1 million shares of common stock outstanding, 1/2 million shares of preferred stock, and 20,000 3.5% semiannual bonds outstanding. The common stock has a beta of 1.2. The corporate bond has a par value of $1,000 each and matures in 14 years. Currently the bonds are selling at 94% of their face values. The market risk premium is 9%. The risk-free rate is 3%. The common stock sells for $40 per share. The preferred stock sells for...

Empire Today Inc. has 10 million shares of common stock outstanding, 300,000 shares of 5% preferred...

Empire Today Inc. has 10 million shares of common stock outstanding, 300,000 shares of 5% preferred stock outstanding, and 7 million of 6.7 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $85 per share and has a beta of 1.15, the preferred stock currently sells for $103 per share, and the bonds have 20 years to maturity and sell for 93% of par. The market risk premium is 11 percent, T-bills are yielding 2.14...

Solar Shades has 8.8 million shares of common stock outstanding, 4.8 million shares of preferred stock...

Solar Shades has 8.8 million shares of common stock outstanding, 4.8 million shares of preferred stock outstanding, and 18 thousand bonds. If the common shares are selling for $13.80 per share, the preferred share are selling for $30.80 per share, and the bonds are selling for 104.92 percent of par, what would be the weight used for equity in the computation of Solar Shade's WACC?

Sports Corp has 11.8 million shares of common stock outstanding, 6.8 million shares of preferred stock...

Sports Corp has 11.8 million shares of common stock outstanding, 6.8 million shares of preferred stock outstanding, and 2.8 million bonds. If the common shares are selling for $26.8 per share, the preferred share are selling for $14.3 per share, and the bonds are selling for 96.82 percent of par, what would be the weight used for equity in the computation of Sports's WACC?

Town Beverage has 8 million shares of common stock outstanding, 6 million shares of preferred stock...

Town Beverage has 8 million shares of common stock outstanding, 6 million shares of preferred stock outstanding, and 5 thousand bonds. If the common shares are selling for $20 per share, the preferred shares are selling for $10 per share, and the bonds are selling for 105 percent of par, what would be the weight used for preferred stock in the computation of Town Beverage's WACC? A. 26.64% B. 27.27% C. 29.85% D. 33.33% E. 42.84% Echo Sound has 4...

Question

Google currently has a 5 million common shares outstanding, and a 1 million preferred shares outstanding,...

Solutions

Expert Solution

Related Solutions

Edited: To add missing information. #6 Google currently has a 5 million common shares outstanding, and...

Titan Mining Corporation has 8 million shares of common stock outstanding, 5 million shares of preferred...

Titan Mining Corporation has 8 million shares of common stock outstanding, 5 million shares of preferred...

Fairyland Inc. has 4 million shares of common stock outstanding, 1 million shares of preferred stock...

ABC Corporation has 1/2 million shares of common stock outstanding, 1 million shares of preferred stock,...

Anderson Corporation has 1 million shares of common stock outstanding, 1/2 million shares of preferred stock,...

Empire Today Inc. has 10 million shares of common stock outstanding, 300,000 shares of 5% preferred...

Solar Shades has 8.8 million shares of common stock outstanding, 4.8 million shares of preferred stock...

Sports Corp has 11.8 million shares of common stock outstanding, 6.8 million shares of preferred stock...

Town Beverage has 8 million shares of common stock outstanding, 6 million shares of preferred stock...