Question
In: Finance
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 rate is 35%?
A) 8.60%
B) 7.69%
C) 8.15%
D) 9.05% <-- Correct answer
Please show me step by step how to do this problem, please.
Solutions
jeff jeffy answered 1 year 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...
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...
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...
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...
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...
Netgear has no debt, a market value of equity of $1.43 billion, $361 million of cash,...
Netgear has no debt, a market value of equity
of $1.43 billion, $361 million of cash, and an equity Beta of 2.0.
Meanwhile, Westar Energy has $4.02 billion of debt, a market value
of equity of $7.16 billion, only $3.36 million of cash, and an
equity Beta of 0.33.
Thus these two publicly traded firms have very different capital
structures. Netgear is profitable and has been for the last decade;
however, the firm’s management appears to be quite averse to...
6. Elway Electronics has debt with a market value of $350,000, preferred stock with a market...
6. Elway Electronics has debt with a market value of $350,000,
preferred stock with a market value of $150,000, and common stock
with a market value of $450,000. If debt has a cost of 8%,
preferred stock has a cost of 10%, common stock has a cost of 12%,
and the firm has a tax rate of 30%, what is the WACC?
a. 8.64%
b. 9.12%
c. 9.33%
d. 10.04%
PLEASE SHOW WORK
A firm has a debt-equity ratio of 4. The market value of the firm’s debt and...
A firm has a debt-equity ratio of 4. The market value of the
firm’s debt and equity is £5m. What is the value of the firm’s
debt?
A: £4.0m
B: £3.8m
C: £4.5m
D: £2.6m
A firm has a debt-equity ratio of 4. The cost of debt capital
is 8% and the cost of equity capital is 12%. What is the weighted
average cost of capital for the firm (WACC)?
A: 10.1%
B: 8.8%
C: 9.5%
D: 9.2%
Suppose Modigliani-Miller...
Nipigon Manufacturing has a cost of debt of 7 %, a cost of equity of 12%, and a cost of preferred stock of 9%.
Nipigon Manufacturing has a cost of debt of 7 %, a cost of equity of 12%, and a cost of preferred stock of 9%. Nipigon currently has 130,000 shares of common stock outstanding at a market price of $25 per share. There are 48,000 shares of preferred stock outstanding at a market price of $38 a share. The bond issue has a face value of $950,000 and a market quote of 104. The company’s tax rate is 35%.Required:Calculate the weighted...
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