A firm cost of debt = 6%, cost of Preferred stock = 5%, and required common...

A firm cost of debt = 6%, cost of Preferred stock = 5%, and required common stock return = 12%. if the capital structure = 30% debt, 5% preferred, and 65% common stock, calculate the WACC:

	1.	8.55%
	2.	9.63%
	3.	10.21%
	4.	none of the answers are correct

Expert Solution

jeff jeffy answered 1 year ago

Capital component weights, cost of debt, cost of preferred stock, and cost of common equity.

Capital component weights, cost of debt, cost of preferred stock, and cost of common equity. Be sure to use 4 decimal places. Current assets: 3,100 Property, plant and equipment: 3,400 Total assets: 6,500. Current liablities: 1,500 Long term debt: 1,750 Preferred stock, $100 par: 500 Common stock, no par: 1,250 Retained earnings: 1,500 Total liabilities and equities: 6,500 Growth rate 7.5% Coupon on new bonds: 7.75% Corporate tax rate: 25% Dividend on preferred: 8% Price of common stock: $24.00 Price...

How to find the cost of debt, cost of preferred stock, cost of common equity, capital...

How to find the cost of debt, cost of preferred stock, cost of common equity, capital structure, and the weighted average cost of capital for a publicly traded company like Costco or Amazon.

Explain how to adjust component cost of debt, preferred stock, common stock for flotation costs?

Source of Capital Proportions Long-term debt 30% Preferred stock 5% Common stock equity 65% Debt: The...

Source of Capital Proportions Long-term debt 30% Preferred stock 5% Common stock equity 65% Debt: The firm can sell a 10-year, $1,000 par value, 7 percent bond for $950. A flotation cost of 3percent of the par value would be required in addition to the discount of $50. Preferred Stock: The firm has determined it can issue preferred stock at $45 per share par value. The stock will pay an $6.5 annual dividend. The cost of issuing and selling the...

What is the cost of debt, preferred stock and common equity for Forecasters R US? What...

What is the cost of debt, preferred stock and common equity for Forecasters R US? What is the WACC: The firm is in the 40% tax bracket. The optimal capital structure is listed below: Briefly discuss your results and what they represent. Source of Capital Weight Long-Term Debt 25% Preferred Stock 20% Common Stock 55% Debt: The firm can issue $1,000 par value, 8% coupon interest bonds with a 20-year maturity date. The bond has an average discount of $30...

Turnbull Co. has a target capital structure of 58% debt, 6% preferred stock, and 36% common...

Turnbull Co. has a target capital structure of 58% debt, 6% preferred stock, and 36% common equity. It has a before-tax cost of debt of 11.1%, and its cost of preferred stock is 12.2%. If Turnbull can raise all of its equity capital from retained earnings, its cost of common equity will be 14.7%. However, if it is necessary to raise new common equity, it will carry a cost of 16.8%. If its current tax rate is 25%, how much...

The identification of the proportions of debt, retained earnings, preferred stock, and common stock used to...

The identification of the proportions of debt, retained earnings, preferred stock, and common stock used to finance a firm’s operations and capital investments is referred to as the: A. Capital structure decision B. Financing decision C. Financial risk decision D. Capital budgeting decision New projects should be funded using: A. The same proportions of debt and equity that finance a firm’s total assets B. The source of funds (debt or equity) with the lowest cost of capital C. Debt only...

OMG Inc. has 6 million shares of common stock outstanding, 5 million shares of preferred stock...

OMG Inc. has 6 million shares of common stock outstanding, 5 million shares of preferred stock outstanding, and 7,000 bonds. Suppose the common shares sell for $17 per share, the preferred shares sell for $16 per share, and the bonds sell for 108 percent of par. What weight should you use for preferred stock in the computation of OMG’s WACC? (Round your answer to 2 decimal places.)

Given the following information. Percent of capital structure: Debt 10 % Preferred stock 5 Common equity...

Given the following information. Percent of capital structure: Debt 10 % Preferred stock 5 Common equity 85 Additional information: Bond coupon rate 13 % Bond yield 11 % Dividend, expected common $7.00 Dividend, preferred $14.00 Price, common $70.00 Price, preferred $110.00 Flotation cost, preferred $2.50 Corporate growth rate 4 % Corporate tax rate 30 % Calculate the weighted average cost of capital for Genex Corporation. Line up the calculations in the order shown in Table 11-1. (Do not round your...

Common Stock (with beta 1.2) $7,000,000 Debt $3,000,000 Preferred Stock (Price $100 per share; flotation cost...

Common Stock (with beta 1.2) $7,000,000 Debt $3,000,000 Preferred Stock (Price $100 per share; flotation cost $2 per share) $2,000,000 Yield to Maturity 6% Corporate tax rate 30% Preferred stock dividend $4 Risk free rate 5% Market rate of return 12% Required: Given the above information, calculate the weighted average cost of capital (WACC) for Big Mart Inc. Why it is important for Big Mart Inc. to calculate WACC?

Question