A firm has a capital structure with 40% debt, 50% equity, and 10% preferred stock. If the following information is given, calculate company's WACC.
YTM on firm's bond is 7.2%
Beta is 1.2; risk free rate 5%; market risk premium is 5%
Preferred stock pays dividend of $8 and sells for $100
See attached file.
Provided to you are 2 rounds of separate WACC analysis.
Please provide an explanation of the WACC results and compare the rounds to each other.
Are the WACC results a positive outcome?
The corporation has no debt but can borrow at 7%. The firms WACC is currently 10% with no corporate tax.
1. So what's the cost of equity?
2. Whats the cost of equity at 30% or 60% and what's the WACC?
Thanks for the help!
a. What is Weighted Average Cost of Capital (WACC)? Identify TWO (2) factors that affect
the WACC of a company.
1- Using debt can help reduce the agency problem that may arise between the
management of a company and its shareholders. Explain.
2- Explain the effects of the following on the company's weighted averag
The general rule for using the weighted average cost of capital in capital budgeting decisions is accept all projects with rates of return greater or equal to the WACC, less than the WACC, equal to or less than the WACC or positive rates of return
A Corp. has no debt but can borrow at 8 %. The firm's WACC is currently 12% and has tax rate of 35%.
a. What is the cost of equity?
b. If the Corp. converts to 25 % debt,what will cost of equity be? 50 %?
c. What is shadow's WACCfor part b: 25 % and 50 %.