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
The Boonville and Western Transportation Co. has the following capital structure.
Stock $50 mil with a P/E of 8
Bonds $20 million at 8 %
The company has a tax rate of 35%
What is the weighted average cost of Capital (WACC)
If the Boonville and Western Transportation Co had Bonds of $50 million a
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?
Assume everything is held constant, which of the following statements best describes the relationship between rs, (1-T)rd, WACC, and the debt total asset ratio?
a. rs, (1-T)rd, and WACC all increase whenever the debt/total asset ratio rises.
b. rs, (1-T)rd and WACC all decrease whenever the debt/total asset ratio rises.
Reactive Industries has the following capital structure. Its corporate tax rate is 35 percent. What is its WACC?
SECURITY MARKET VALUE REQUIRED RATE OF RETURN
DEBT $20 Million 6%
PREFERRED STOCK $10 Million 8%
COMMON STOCK $50 Million 12%
Copernicus Inc. has determined that its target capital structure will be 60% debt, 10% preferred stock, and 30% common stock. As the financial manager, the CFO has informed you that the company's before tax cost of debt is 10%, preferred stock is 14%, and common stock is 16%. In addition, the company's marginal tax rate is 4
McCabe Interests has three major investments, which are given here. What should be McCabe's WACC?
INVESTMENT MARKET VALUE REQUIRED RETURN
Storage sheds $35 million 12%
Ice rinks 15 million 17%
Office furniture sales 50 million