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    Question about Market Value and WACC

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    Please help with the following problem.

    The A. J. Croft Company (AJC) currently has $200,000 market value (and book value) of perpetual debt outstanding carrying a coupon rate of 6 percent. Its earnings before interest and taxes (EBIT) are $100,000, and it is a zero-growth company. AJC's current cost of equity is 8.8 percent, and its tax rate is 40 percent. The firm has 10,000 shares of common stock outstanding selling at a price per share of $60.00.

    What is AJC's current total market value and weighted average cost of capital?

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    https://brainmass.com/business/discounted-cash-flows-model/question-about-market-value-and-wacc-83706

    Solution Preview

    Problem: The A. J. Croft Company (AJC) currently has $200,000 market value (and book value) of perpetual debt outstanding carrying a coupon rate of 6 percent. Its earnings before interest and taxes (EBIT) are $100,000, and it is a zero-growth company. AJC's current cost of equity is 8.8 percent, and its tax rate is 40 percent. The firm has 10,000 shares ...

    Solution Summary

    The solution explains how to calculate the market value of a firm and its WACC. Step by step calculations are provided in the solution.

    $2.19

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