Explore BrainMass

Weighted Average Cost of Capital (WACC)

Weighted Average Method: Durall Company, manufacturer of plastic gaskets

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

Affect to a firm's cost of debt, cost of equity, and WACC

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 for Dillion Corp

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

WACC and Project NPV

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

Drying and Packaging Dept: Transferred-in costs, weighted-average, FIFO methods

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

Retained earnings, cash flows, WC, EVA, MVA,WACC

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: Weighted Average Cost of Capital (WACC)

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

Cost of Capital

Please see the file attached. Garner Data Systems - Comprehensive Problem

Weighted Average of Cost of Capital

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?

In what sense is the WACC an average cost?

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

Coca Cola Co.

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 $

WACC and Cost of Debt

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

Weighted Average Cost of Capital

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,

Ewing Distribution Company - WACC

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 weighted average cost of capital?

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%

EMC & Brooks Enterprise - Value of Operation of Constant Growth

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

Federal reserve shift in monetary policy

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