ABC's outstanding 5% coupon rate bonds mature in 10 years, and are selling for $900. The...

ABC's outstanding 5% coupon rate bonds mature in 10 years, and are selling for $900. The bonds make annual coupon payments.

ABC preferred stock pays $2.00 dividend per share and sells for $50 per share.

ABC common has a beta of 1.1, the risk free rate is 3% and the expected return on the market is 8%.

ABC's optimal capital structure is 30% debt, 10% preferred stock, and 60% common equity. Tax rate is 40%.

Would you show how you calculate the following:

a. after-tax cost of debt = 3.8% I have the equation rd (1-T) but not sure what rd would be?

b. preferred stock = 4% I have the equation, rps = dividend on preferred stock/value of preferred stock but not sure if this is correct and what to plug in?

c. common stock = 8.5%

d. WACC = 6.6% I have the equation but not sure what each is to insert in the equation: wdrd(1-T) + wprp + wsrs

Solutions

Expert Solution

jeff jeffy answered 11 months ago

Next > < Previous

Related Solutions

ABC's bond currently sell for $900. If the coupon rate is 8% and the bonds have...

ABC's bond currently sell for $900. If the coupon rate is 8% and the bonds have 11 years to maturity, what is the yield to maturity? Assume that the par value is $1,000 and coupon payments are semi-annual.

The Kenny Company has 10,000 bonds outstanding. The bonds are selling at 98% of face value, have a 10% coupon rate, pay interest semi-annually, and mature in 9 years.

The Kenny Company has 10,000 bonds outstanding. The bonds are selling at 98% of face value, have a 10% coupon rate, pay interest semi-annually, and mature in 9 years. There are 1.87 million shares of common stock outstanding with a market price of $15 a share and a beta of 0.89. The common stock just paid a dividend of $0.7474 and expects to increase those dividends by 1.35% annually. The flotation cost for equity is 6.5% and the flotation...

Bangladesh Petroleum's 10% coupon rate, BDT 1000 par value bonds that mature in 10 years are...

Bangladesh Petroleum's 10% coupon rate, BDT 1000 par value bonds that mature in 10 years are callable 6 years from now at a price of BDT 1050 and redeemable at par in maturity. The bonds currently sell at a price of BDT 1353.54. What could be the internal rate of return as an investor of this bond, if the market interest is expected to stable for the following 6 years and later to decline?

ABC's bonds will be maturing in 8 years, pay 8 percent coupon rate on the $1,000...

ABC's bonds will be maturing in 8 years, pay 8 percent coupon rate on the $1,000 par value. a. The value of the bond is $________, if the coupon is paid semiannually. (Round to the nearest cent.) b. The value of the bond is $________, if the coupon is paid annually.

Lupe has 5% bonds outstanding that mature in six years the bonds pay interest semiannually and...

Lupe has 5% bonds outstanding that mature in six years the bonds pay interest semiannually and have a face value of $1000 currently the barns are selling for $976 the current tax rate is 21% what is the firms pretax cost of debt? A 4.97% B 5.18% C 5.47% D 6.31% E 5.80% General Disco has 8.2% semi annual coupon bonds outstanding that mature in 11 years. The yield to maturity is 7.4% what price are these bonds selling for?...

Goody's bonds pay a 8 percent annual coupon rate. The bonds mature in 13 years. The...

Goody's bonds pay a 8 percent annual coupon rate. The bonds mature in 13 years. The bond pays interest semiannually. What is the price per bond if the face value is $1,000 and the yield to maturity is 10 percent? (Round your answer to two decimal places. Do not enter dollar signs.)

A corporation has 10,000 bonds outstanding with a 7% annual coupon rate, 10 years to maturity,...

A corporation has 10,000 bonds outstanding with a 7% annual coupon rate, 10 years to maturity, a $1,000 face value, and a $950 market price. The company’s 400,000 shares of common stock sell for $85 per share, have a beta of 1.2, the risk-free rate is 2%, and the expected market return is 18%. Assuming a tax rate of 35%, what is this corporation’s weighted average cost of capital? Please use excel and show the formulas used if can. Thanks...

a manufacturing company has 40,000 bonds outstanding with a 10% annual coupon rate, 11 years to...

a manufacturing company has 40,000 bonds outstanding with a 10% annual coupon rate, 11 years to maturity, a $4000 face value, and a $4,1000 market price. yield to maturity (YTM) is 7.48%. the company's 800,000 shares of common stock sell for $55 per share and have a beta of 1.8. the risk-free rate is 4%,and the market return is 15%. assuming a 40% tax rate, what is the company;s WACC? Management has decided to add an additional 2.0 percent to...

11- ABC's has an outstanding bond with a coupon rate of 8 percent that matures in...

11- ABC's has an outstanding bond with a coupon rate of 8 percent that matures in 12 years. The bond pays interest annually. If the face value of the bond is $1,000 face value and the yield to maturity is 6 percent, find the following "Show your formula and calculations": Is this bond issued at discount, premium, or at par? Why? What is the value of the bond at the date of issuance? (you may use your financial calculator) What...

Best Buy has some bonds outstanding. These bonds pay interest semiannually, mature in 5 years, and...

Best Buy has some bonds outstanding. These bonds pay interest semiannually, mature in 5 years, and have a 8 percent coupon. The current price of the bond is $1010. What is the yield to maturity?

Subjects