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In: Finance
4. Assume the market value of Exxon Mobil’s equity, preferred stock, and debt are $10 million,...
4. Assume the market value of Exxon Mobil’s equity, preferred stock, and debt are $10 million, $6 million, and $14 million, respectively. The preferred stock outstanding pays a 9% annual dividend and has a par value of $100. The common stock currently has a beta of 1.15, the preferred stock currently sells for $80 per share, and the 10% semiannual bonds have 17 years to maturity and sell for 91% of par. The market risk premium is 11.5%, T-bills are yielding 7.5%, and the firm's tax rate is 32%. What discount rate should the firm apply to a new project's cash flows if the project has the same risk as the firm's typical project?
Solutions
jeff jeffy answered 10 months agoRelated Solutions
Assume the market value of Fords' equity, preferred stock and debt are $7 billion, $4 billion...
Assume the market value of Fords' equity, preferred stock and
debt are $7 billion, $4 billion and $10 billion respectively. Ford
has a beta of 1.4, the market risk premium is 6% and the risk-free
rate of interest is 4%. Ford's preferred stock pays a dividend of
$3 each year and trades at a price of $25 per share. Ford's debt
trades with a yield to maturity of 8.5%. Currently, Ford is
considering investing in a new project with an...
Assume the market value of Fords' equity, preferred stock and debt are $7 billion, $4 billion...
Assume the market value of Fords' equity, preferred stock and
debt are $7 billion, $4 billion and $10 billion respectively. Ford
has a beta of 1.4, the market risk premium is 6% and the risk-free
rate of interest is 4%. Ford's preferred stock pays a dividend of
$3 each year and trades at a price of $25 per share. Ford's debt
trades with a yield to maturity of 8.5%. Currently, Ford is
considering investing in a new project with an...
Assume the market value of Fords' equity, preferred stock and debt are $7 billion, $4 billion...
Assume the market value of Fords' equity, preferred stock and
debt are $7 billion, $4 billion and $10 billion respectively. Ford
has a beta of 1.4, the market risk premium is 6% and the risk-free
rate of interest is 4%. Ford's preferred stock pays a dividend of
$3 each year and trades at a price of $25 per share. Ford's debt
trades with a yield to maturity of 8.5%. What is Ford's weighted
average cost of capital if its tax...
MV Corporation has debt with market value of $104 million, common equity with a book value of $96 million, and preferred stock worth $18 million
MV Corporation has debt with market value of $104 million, common equity with a book value of $96 million, and preferred stock worth $18 million outstanding. Its common equity trades at $50 per share, and the firm has 6.3 million shares outstanding. What weights should MV Corporation use in its WACC?The debt weight for the WACC calculation is _______ % (Round to two decimal places.)
The market value of Fords' equity, preferred stock, and debt are $ 7 billion, $ 3...
The market value of Fords' equity, preferred stock, and debt
are $ 7 billion, $ 3 billion, and
$ 12 billion, respectively. Ford has a beta of 1.5
the market risk premium is 8%,
and the risk-free rate of interest is 4%.
Ford's preferred stock pays a dividend of $ 2
each year and trades at a price of $26
per share. Ford's debt trades with a yield to maturity of
77%.
What is Ford's weighted average cost...
The market value of Fords' equity, preferred stock and debt are $7 billion, $1 billion, and...
The market value of Fords' equity, preferred stock and debt are
$7 billion, $1 billion, and $10 billion, respectively.
Ford has a beta of 1.8, the market risk premium is 7%, and
the risk-free rate of interest is 3%. Ford's preferred stock pays
a dividend of $4.50 each year and trades at a price of $26 per
share. Ford's debt trades with a yield to maturity of 9.5%.
What is Ford's weighted average cost of capital if its
tax rate...
Part A. Assume the cost of equity, preferred stock and debt of JPM Inc are 20%,...
Part A. Assume the cost of equity, preferred stock and debt of
JPM Inc are 20%, 15% and 12%, respectively. Their capital structure
is 40% equity, 20% preferred stock and 40% debt. What is the
weighted cost of capital (WACC) if the tax rate is 40%?
a. 16.16%
b. 14.42%
c. 15.88%
d. 13.88%
Part B. JPM Inc proposes to borrow $10 million
capital to expand their operations, $4 million in bonds and the
rest in common stock. They can...
A company has equity with market value $100 million and debt with market value at $70
A company has equity with market value $100 million and debt with market value at $70 million. The debt pays perpetual expected coupons of $3.5 million annually.The numbers above are prior to a stock buyback being announced.The company uses some of its cash buyback stock on of $20 million. As a result of the fall in its cash, the expected coupon payment to debt reduce to $3.4 million (expected payments is the probability-weighted future coupons and the probability that in...
Acetate, Inc., has equity with a market value of $22.8 million and debt with a market...
Acetate, Inc., has equity with a market value of $22.8 million
and debt with a market value of $6.84 million. The cost of debt is
9 percent per year. Treasury bills that mature in one year yield 5
percent per year, and the expected return on the market portfolio
is 12 percent. The beta of Acetate’s equity is 1.13. The firm pays
no taxes.
a. What is Acetate’s debt-equity ratio? (Do not round
intermediate calculations and round your final answer...
Harris, Inc., has equity with a market value of $23.8 million and debt with a market...
Harris, Inc., has
equity with a market value of $23.8 million and debt with a market
value of $11.9 million. Treasury bills that mature in one year
yield 4 percent per year and the expected return on the market
portfolio is 10 percent. The beta of the company’s equity is 1.23.
The company pays no taxes.
a.
What is the
company's debt-equity ratio? (Do not round intermediate
calculations and round your answer to 2 decimal places, e.g.,
32.16.)
b....
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