Corporate Finance (Weighted Average Cost of Capital)
Not what you're looking for?
You have been asked to calculate the weighted average cost of capital for Future Flow Enterprises (FFE) and have been provided with the following information to complete the task.
 The company's effective tax rate is 40%
 FFE currently has a bond issue outstanding, with a market price of $1,136.28 per $1,000 face value. Each bond pays 8% interest, with interest paid semi-annually.
There are 14 years remaining until maturity on this issue
 FFE has 100,000 preferred shares outstanding, with a stated dividend of $10.50 per share, and an average issue price of $105.00 per share. The current market price of these shares is $113.45
 FFE common shares currently trade at $50.00 per share. Its last dividend was $4.15 per share, and dividends are expected to grow at a constant rate of 4.00% for the foreseeable future.
 FFE's target capital structure is 30% debt, 10% preferred equity and the balanceas common equity
 FFE estimates that retained earnings will be $250,000 for the coming year
Based on this information what is the weighted average cost of capital for FFE (round all calculations to 4 decimal places)?
a. 0.0395
b. 0.0657
c. 0.0716
d. 0.0793
e. 0.0833
Purchase this Solution
Solution Summary
The weighted average cost of capitals for corporate finance is examined.
Purchase this Solution
Free BrainMass Quizzes
Marketing Research and Forecasting
The following quiz will assess your ability to identify steps in the marketing research process. Understanding this information will provide fundamental knowledge related to marketing research.
Organizational Leadership Quiz
This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.
Six Sigma for Process Improvement
A high level understanding of Six Sigma and what it is all about. This just gives you a glimpse of Six Sigma which entails more in-depth knowledge of processes and techniques.
Learning Lean
This quiz will help you understand the basic concepts of Lean.
Accounting: Statement of Cash flows
This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.