Weighted Average Method Durall Company manufactures a plastic gasket that is used in automobile engines. The gaskets go through three processing departments: mixing, forming, and stamping. The company's accountant (who is very inexperienced) has prepared a summary of production and costs for the forming department as follows
Bolero has compiled the following information on its financing costs: Type of Financing Book Value Market Value Cost Long-term debt $5,000,000 $2,000,000 10% Short-term debt $5,000,000 $5,000,000 8% Common Stock $10,000,000 $13,000,000 15% Total $20,000,000 $20,000,000
Marginal cost of capital (WACC) above and below the break points in the MCC: A company has been growing at a constant rate of 8% a year. Its retained earnings for the year are $16 million, common stock is selling for $60, and the current debt to assets ratio is 35%. The company can raise up to $18 million in debt at 8%. A 12% interest will apply if the amount exceeds $18 million. New common stock yields the firm $45. The required rate of return on retained earnings is 12%.The tax rate is 40%. Calculate the marginal cost of capital (WACC) above and below the break points in the MCC schedule.
A company has been growing at a constant rate of 8% a year. Its retained earnings for the year are $16 million, common stock is selling for $60, and the current debt to assets ratio is 35%. The company can raise up to $18 million in debt at 8%. A 12% interest will apply if the amount exceeds $18 million. New common stock yields
Please see attached file. How would each of the following affect a firm's cost of debt, rd(1-T); its cost of equity, rs; and its weighted average cost of capital, WACC? Indicate by a plus (+), a minus (-), or a zero (0) if the factor would raise, lower, or have an indeterminate effect on the item in question. Assume other t
Analysis of Work in Process Account - Weighted Average Method Dillion Corporation manufactures an industrial cleaning compound that goes through three processing departments-Grinding, mixing, and Cooking. All raw materials are introduced at the start of work in the Grinding Department. The Work in Process T-Account for a rece
Cost of Capital Spreadsheet: a. What is the current Kd, Kp and Ke assuming no new debt or stock? And what is the current cost of capital? b. At what size capital structure will the firm run out of retained earnings? c. At that point what will the Kne (cost of new common equity) be? And what will the cost of capital be? d. At what size of capital structure will the firm's cost of debt change? e. At that point what will the new Knd (after tax cost of debt) be? And what will the cost of capital be? f. Given the above summarized the amounts of financing levels and costs of captial for each level. g. Rank the projects from highest returns to lowest. h. Explain what projects are accepted and why and which are rejected and why? i. Given your answer to h, what then would be the new FMV's of debt and equities?
Rolling Stone Manufacturing is going to introduce a new product line and to accomplish this it has four projects analyzed in which it wants to invest a total of $100 million. Your job is to find what it will cost to raise this amount of capital and based on the cost of capital determine which of the projects should be accepted
Midwest Water Works estimates that its WACC is 10.5 percent. The company is considering the following capital budgeting projects: Project Size Rate of Return A 1 million 12.0% B 2 million 11.5% C 2
Transferred-in costs, weighted-average and FIFO methods. Frito-Lay, Inc., manufactures convenience foods, including potato chips, and corn chips. Production of corn chips occurs in four departments: cleaning, mixing, cooking, and drying and packaging. Consider the Drying and Packaging Department, where direct materials (packa
Cumberland Industries most recent balance sheets in thousands of dollars are shown below and in partial model in file a. The company's sales for 2005 were $455,150,000 and EBITDA was 15% of sales. Furthermore depreciation amounted to 11% of net fixed assets, interest charges were $8,575,000, the state plus federal corporate
Rolodex, Inc. would like to estimate its average cost of capital for the coming year. The capital budgeting plans call for funds totaling $200 million for the coming year. These funds will be raised from long-term debt, preferred stock, and common equity in the same proportions as their book values in the firm's balance sheet sh
With the following information compute the WACC: Corporate tax rate 40%, before tax cost of debt - 12%, preferred stock price - $32, common stock price - $21, dividend growth rate - 4.7%, preferred stock yearly dividend - $5.00, common stock yearly dividend - $2.50, preferred stock flotation cost per share $6.00.
Problem 12: Given the following data: Percent of capital structure: Debt 40% Preferred stock 10 Common equity 50 Additional information: Bond coupon rate 12% Bond yield to maturity 13% Dividend, expected common $4.00 Dividend, preferred $12.00 Price, common $60.00 P
Please see the file attached. Garner Data Systems - Comprehensive Problem
Is it important to know your company's WACC? Why or why not? How might management decisions impact the WACC? To what extent is your company's WACC uncontrollable?
American Widget company has total capital, consisting of long-term debt and common equity, of $120 million. Fifty million of total capital is in the form of long-term debt, which carries a cost of 10 percent. The company's equity carries a cost of 16 percent. If the company's tax rate is 35 percent, what is the WACC?
Question 1: In what sense is the WACC an average cost? A marginal cost? Question 2: A company's 6% coupon rate, semiannual payment, $100 par value bond that matures in 30 years sells at a price of $515.16. The company's federal-plus-state tax rate is 40%. What is the firm's component cost of debt for purposes of calculati
All the questions are about Coca Cola Co. answer all questions about information that you find in the internet website. The company that choose is Coca Cola Co. 1-Select a publicly traded company and obtain their financial statements, from these financial statements determine how the company is financed. What is the mix of the
Given the following information for Bellevue Power Co., find the WACC. Assume the company's tax rate is 31%. DEBT: 4,800 8% coupon bonds outstanding, $1,000 par value, 21 years to maturity, selling for 103% of par, the bonds make semiannual payments. COMMON STOCK: 94,500 shares outstanding, selling for $62 per share; t
Rose Corp., a privately-owned company, is going public soon. After the IPO, the company expects its total assets to be $50 million. It plans to raise $25 million by selling 12%, 20-year bonds at par. Rose also anticipates selling $5 million of preferred stock, with each share ($100 par value) receiving an annual dividend of $
Given the following information for Bajor Co.: Debt: Bajor's long-term debt capital consists of bonds with 8.250 percent coupon rate (semiannual coupon payments), 28 years time to maturity, and current price of 106.75 percent of its par value. Preferred stock: Bajor has not issued any preferred stocks. Common stock (e
Please assist with the following statements and question: There are few ways to compute the weighted average cost of capital for a company: Of course one first estimates the 'cost' (in percentage terms) of the three main sources of capital: short term debt or liabilities, long term debt or liabilities and the cost of equity,
The Comfort Corporation manufactures sofas and tables for the recreational vehicle market. The firm's capital structure, consist of 60 percent common equity, 10 percent preferred stock, and 30 percent long-term debt. This capital structure is believed to be optimal. Comfort will require $120 million to finance expansion plans fo
The Ewing Distribution Company is planning a $100 million expansion of its chain of discount service stations to several neighboring states. This expansion will be financed, in part, with debt issued with a coupon interest rate of 6.8 percent. The bonds have a 10-year maturity and a $1,000 face value, and they will be sold to ne
What is the firm's weighted-average cost of capital at various combinations of debt and equity, given the following information?
Please see the attached file. SAMPLE QUESTION INTO UNDERSTANDING THIS MY HOMEWORK SHOULD EASY. 3. A firm's current balance sheet is as follows: Assets $100 Debt $10 Equity $90 a. What is the firm's weighted-average cost of capital at various combinations of debt and equity, given the following informati
10. The Comfort Corporation manufactures sofas and tables for the recreational vehicle market. The firm's capital structure consists of 60 percent common equity, 10 percent preferred stock, and 30 percent long-term debt. This capital structure is believed to be optimal. Comfort will require $120 million to finance expansion plan
Dobson Dairies has a capital structure which consists of 60 percent long-term debt and 40 percent common stock.
Dobson Dairies has a capital structure which consists of 60 percent long-term debt and 40 percent common stock. The company s CFO has obtained the following information: · The before-tax yield to maturity on the company s bonds is 8 percent. · The company s common stock is expected to pay a $3.00 dividend
Please give all calculations and show the work so I can learn how it's done. The ABC Co is in the process of determining a return rate to use or its cost of capital. Upon review of the financial statements it was determined that the total interest bearing debt is $1,400,000 and total stockholders' equity is $1,000,000. In add
What is the weighted average cost of capital for ABC Corporation? Source of Capital Capital Components Cost Long Term Debt $60,000 5.6% Preferred Stock $15,000 10.6% Common Stock $75,000 13.0%
Problem 15-2 (Value of operation of constant growth firm) EMC Corporation has never paid a dividend. Its current free cash flow is $400,000 and is expected to grow at a constant rate of 5%. The weighted average cost of capital is WACC =12%. Calculate EMC's value of operations. Problem 15-6 (Value of operations) Br
The Federal Reserve recently shifted its monetary policy, causing Laser Vision's WACC to change. Laser had recently analyzed the project whose cash flows are shown below. However, the CFO wants to reconsider this and all other proposed projects in view of the Fed action. How much did the changed WACC cause the forecasted NPV