Question
In: Finance
You find the following information for a company: A corporation has 8,000 bonds outstanding with a...
You find the following information for a company: A corporation has 8,000 bonds outstanding with a 12% annual coupon rate (paying semi-annually), 8 years to maturity, a $1,000 face value, and a $1,250 market price. The company’s 600,000 shares of common stock sell for $25 per share and have a beta of 2. The risk free rate is 1%, and the market risk premium is 7%. a) What is the cost of Debt (RD)? b) What is the cost of Equity (RE)? c) What is the capital structure weight of equity (wE)? d) What is the capital structure weight of debt (wD)? e) What is the WACC for this firm, if the corporate tax rate is 40%?
Solutions
jeff jeffy answered 1 year agoRelated Solutions
Use the following information to answer questions 19 through 24.A corporation has 10,000 bonds outstanding with...
Use the following information to answer questions
19 through 24.A corporation has 10,000 bonds outstanding with a
6% annual coupon rate, 8 years to maturity, a $1,000 face value,
and a $900 market price.
The company’s 500,000 shares of common stock sell for $10per
share, have a beta of 1.5, the risk-free rate is 4%, and the market
risk premium is 8%.
19.What is the market value of equity for this corporation?
A.$5 million
B.$11 million
C.$12.5 million
D.$4 billion...
The Summit Corporation has the following information. Debt: 30,000 bonds outstanding, 6 percent coupon, $1,000 par...
The Summit Corporation has the following information. Debt:
30,000 bonds outstanding, 6 percent coupon, $1,000 par value, 10
years to maturity, selling for 98 percent of par; the bonds make
semiannual coupon payments. Common stock: 300,000 shares
outstanding, selling for $30 per share; the beta is 1.60. The
company s tax rate is 25 percent. The market risk premium is 7.0
percent and the risk-free rate is 4.0 percent. Find the company's
WACC.
A company has the following capital components: Bonds- 20,000 bonds outstanding with a 8% coupon rate...
A company has the following capital components:
Bonds- 20,000 bonds outstanding with a 8% coupon rate paid
semiannually, 6 years to maturity, a $1,000 face value, and a $975
market price.
Common Stock- 500,000 shares trading $80 per share and have a
beta of 1.5. The risk free rate is 4% and the market return is
12%
Assuming a 40% tax rate, what is the company's WACC?
Find and discuss a news story about a large public U.S. corporation (with outstanding bonds) that...
Find and discuss a news story about a large public U.S.
corporation (with outstanding bonds) that recently reported an
(unexpected) financial loss. How did (or would) the stock market to
react to this news? How would you expect the bond market to react
to the news? Would this financial loss affect the yield to maturity
on the company's outstanding bonds? If so, why and
how?
Please cite and include links.
PLEASE DO NOT ANSWER IF YOU ARE NOT SURE Sheridan, Ltd. has 8,000 outstanding no par...
PLEASE DO NOT ANSWER IF YOU ARE NOT SURE
Sheridan, Ltd. has 8,000 outstanding no par value $1.00
preferred shares issued for $80,000 and 37,000 outstanding no par
value common shares issued for $22,200.
No dividends were paid or declared during 2020 and 2021. Sheridan
wants to distribute $44,616 in dividends on December 31, 2022.
a) Calculate the amount of dividends to be paid to each group of
shareholders (i.e., preferred and common), assuming the preferred
shares are non-cumulative and...
Sandoz Corporation is estimating its WACC. The company has 50,000 semi-annual bonds outstanding with a 7.5%...
Sandoz Corporation is estimating its WACC. The company has
50,000 semi-annual bonds outstanding with a 7.5% coupon rate,
$1,000 par value, 15 years to maturity, selling for 98.1 percent of
par. Sandoz has 1 million common shares outstanding, currently
selling for $50 per share with a beta of 1.08. In addition, there
are 150,000 shares of 8% preferred stock outstanding, currently
trading for $100 per share.
The risk-free rate is 3% and the market risk premium is 11%. The
marginal...
Sandoz Corporation is estimating its WACC. The company has 50,000 semi-annual bonds outstanding with a 7.5%...
Sandoz Corporation is estimating its WACC. The company has
50,000 semi-annual bonds outstanding with a 7.5% coupon rate,
$1,000 par value, 15 years to maturity, selling for 98.1 percent of
par. Sandoz has 1 million common shares outstanding, currently
selling for $50 per share with a beta of 1.08. In addition, there
are 150,000 shares of 8% preferred stock outstanding, currently
trading for $100 per share.
The risk-free rate is 3% and the market risk premium is 11%. The
marginal...
Sandoz Corporation is estimating its WACC. The company has 50,000 semi-annual bonds outstanding with a 7.5%...
Sandoz Corporation is estimating its WACC. The company has
50,000 semi-annual bonds outstanding with a 7.5% coupon rate,
$1,000 par value, 15 years to maturity, selling for 98.1 percent of
par. Sandoz has 1 million common shares outstanding, currently
selling for $50 per share with a beta of 1.08. In addition, there
are 150,000 shares of 8% preferred stock outstanding, currently
trading for $100 per share.
The risk-free rate is 3% and the market risk premium is 11%. The
marginal...
You are looking at the following information: Debt: 6,000 5 percent coupon bonds outstanding, $1,000...
You are looking at the following information:
Debt:
6,000 5 percent coupon bonds outstanding, $1,000 par value, 21
years to maturity, selling for 104 percent of par; the bonds make
semiannual payments.
Common stock:
138,000 shares outstanding, selling for $65 per share; the beta
is 1.18.
Preferred stock:
17,000 shares of 4 percent preferred stock (review my Ch.8
slide 43: what does "...% preferred stock" phrase mean?)
outstanding, currently selling for $107 per share.
Market:
6 percent market risk...
You are looking at the following information: Debt: 2,500 8.5 percent coupon bonds outstanding, $1,000...
You are looking at the following information:
Debt:
2,500 8.5 percent coupon bonds outstanding, $1,000 par value,
21 years to maturity, selling for 104 percent of par; the bonds
make semiannual payments.
Common stock:
62,500 shares outstanding, selling for $61 per share; the beta
is 1.1.
Preferred stock:
8,000 shares of 7 percent preferred stock (review my Ch.8
slide 43: what does "...% preferred stock" phrase mean?)
outstanding, currently selling for $106 per share.
Market:
10 percent market risk...
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