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WACC, Beta of Levered & Unlevered, Enterprise Value

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Duck Company has the following capital structure. Its corporate tax rate is 35%.
Security
Book Value
Market Value
Cost
Debt
$18 million
$20 million
6%
Common stock
$27 million
50 million
14%
Compute WACC ________________%
CAMPCO has only one bond issue outstanding. The bonds carry an annual coupon of 8%, mature in 19 years, and currently trade at 105. Berber's tax rate is 35%.
What is the after-tax cost of debt? __________________%
Atlas Corp has 30% debt and 70% equity. Its cost of debt is 6% and the cost of equity 11%. The tax rate is 40%.
What is the WACC? _______________%
Morton Salt free cash flow is expected at $38 million next year. The free cash flow is expected to grow at 4% forever. Using the WACC computed in #3, compute the total enterprise value of the firm.
Given the 30% debt / 70% equity capital structure, what is Morton's market value of the equity? $_________
Incipio Inc. has $30 million debt, $20 million preferred stock and $50 million common stock. The costs of debt, preferred and common are 7.5%, 10% and 12%, respectively. Incipio's tax rate is 35%.
What is its WACC? _______________%
Medtronic capital structure is 50% debt and 50% equity. The company is planning to build a plant to manufacture a new semi-automatic gearbox called SLICK. BASF produces only SLICK gearboxes. BASF's beta is 1.2 and BASF's capital structure is 30% debt and 70% equity. The risk free-rate is 3%, the market premium is 7%, and Medtronic's after-tax cost of debt is 6%.
What discount hurdle rate should Medtronic apply to the new plant? Use the proxy firm beta method.
Medtronic's capital structure is 50% debt and 50% equity. The company is planning to build a plant to manufacture a new semi-automatic gearbox called SLICK. BASF produces only SLICK gearboxes. BASF'sbeta is 1.2 and BASF's capital structure is 30% debt and 70% equity. The risk free-rate is 3%, the market premium is 7%, and Medtronic's after-tax cost of debt is 6%.
What discount hurdle rate should Medtronic apply to the new plant? Use the proxy firm beta method.

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Solution Summary

The solution provide various example how WACC, Beta of Levered firm, beta of Unlevered firm, Enterprise Value, cost of equity using CAPM are computed.

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