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Weighted Average Cost of Capital (WACC)

Cost of equity capital and WACC

Amgel Manufacturing Company's current capital structure is comprised of 30% debt and 70% equity (based on market values). Amgel's equity beta (based on its current level of debt financing) is 1.20, and its debt beta is 0.29. Also, the risk-free rate of interest is currently 4.5% on long-term government bonds. Amgel's investment

Calculating Cost of Equity

Smaltz Enterprises is currently involved in its annual review of the firm's cost of capital. Historically, the firm has relied on the CAPM to estimate its cost of equity capital. The firm estimates that its equity beta is 1.25, and the current yield on long-term U.S. Treasury bonds is 4.28%. The firm's CFO is currently in a d

Free Cash Flow and Beta

Reuth Corporation is interested in acquiring Hyatt Corporation. Hyatt has 5 million shares outstanding and a target capital structure consisting of 35 percent debt. Reuth's debt interest rate is 10 percent. Assume that the risk-free rate of interest is 2 percent and the market risk premium is 8 percent. Hyatt's free cas

Compute Weighted Average Cost of Capital (WACC) for Firm X

If Firm X has a 28% cost of equity and a 10% before tax cost of debt capital. The firm's debt to equity ratio is 2. Firm X is interested in investing in a telecom project. The corporate tax rate is 35%. What is the weighted average cost of capital for Firm X? Please include formulas and work process so I can understand wher

Undertake the LBO for home security systems

Cheek Products was founded 53 years ago by Joe Cheek and originally sold snack foods such as potato chips and pretzels. Through acquisitions, the company has grown into a conglomerate with major divisions in the snack food industry, home security systems, cosmetics, and plastics. Additionally, the company has several smaller div

The Market-value balance sheet and WACC calculation

Here is Establishment Industries's market-value balance sheet (figures in millions) Net working capital $ 550 Debt $ 800 Long-Term assets $2150 Equity $1900 ----- ----- Value of firm $2700 $2700 The debt is yielding 7 percent, and the cos

Suppose Sora's revenue and free cash flow are expected to grow at a 5% rate beyond year 4. If Sora's weighted average cost of capital is 10%, what is the value of Sora's stock based on this information?

Sora Industries has 60 milliion outstanding shares, $120 million in debt, $40 million in cash, and the following projected free cash flow for the next four years: (See attached file for details) Suppose Sora's revenue and free cash flow are expected to grow at a 5% rate beyond year 4. If Sora's weighted average

Divisional WACC: Anheuser-Busch Companies, Inc

Divisional WACC In 2006 Anheuser-Busch Companies, Inc (BUD) engaged in the production and distribution of beer worldwide, operating through four business segments: Domestic Beer, International Beer, Packaging, and Entertainment. The Domestic Beer segment offers beer under Budweiser, Michelob, Busch, and Natural brands in the

Estimate: Cost of Equity, WACC and Unlevered Cost of Equity

Estimate the cost of equity, WACC, and unlevered cost of equity. Use Costco wholesale corporation for this task. Find the beta for your company use: http://finance.yahoo.com/q/ks?s=AIG Estimate your company's cost of equity. Estimate your company's weighted-average cost of capital. Estimate your company's unlevered

WACC in Various Combinations of Debt and Equity

See attached file. (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 information?  Debt/Assets After-Tax Cost of Debt Cost of Equity Cost of Capital 0%

Corporate Finance study guide

Please complete the attached study guide by underlining the correct answer. Please include work where needed. Cavern Gear, Inc. * The par value of the common stock is $1 per share. 1. What is the amount of the net cash from investment activity for 2007? A. $37,300 B. $41,800 C. $46,400 D.

Clark Communications: Calculate WACC

Clark Communications has a capital structure that consists of 70% common stock and 30% long-term debt. In order to calculate Clark's WACC, an analyst has accumulated the following information: · The company currently has 15-year, 8% annual coupon bonds that have a face value of $1,000 and sell for $1,075. · The risk-fre

Optimal Capital Structure and WACC

Could someone please view this post? I really need to figure out what I'm doing wrong with these calculations. I have provided most of the information but I don't think it's correct. What can be an optimal capital structure? Should Target changed their capital structure and why? Based on Target's optimal capital structure

Pro-Forma

1.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 information? Debt/Assets After-Tax Cost of Debt Cost of Equity Cost of

Weighted Average Cost of Capital (WACC)..

4. (P10-9) WACC The Patrick Company's cost of common equity is 16 percent, its before-tax cost of debt is 13 percent, and its marginal tax rate is 40 percent. The stock sells at book value. Using the following balance sheet, calculate Patrick's WACC. Assets Cash $120 Accounts receivable 240 Inventories

Calculate Wishing Well's WACC

Table 19.3 shows a book balance sheet for the Wishing Well Motel chain. The company’s long-term debt is secured by its real estate assets, but it also uses short-term bank financing. It pays 10 percent interest on the bank debt and 9 percent interest on the secured debt. Wishing Well has 10 million shares of stock outstanding,

Nevada Hydro weighted-average cost of capital

Nevada Hydro is 40 percent debt-financed and has a weighted-average cost of capital of 9.7 percent: Banker's Tryst Company is advising Nevada Hydro to issue $75 million of preferred stock at a dividend yield of 9 percent. The proceeds would be used to repurchase and retire common stock. The preferred issue would account

Wild Widgets Inc: Cost of debt, equity and weighted average cost of capital

If Wild Widgets, Inc., (WWI) were an all-equity firm, it would have a beta of 0.9.WWI has a target debt-to-equity ratio of 0.50.The expected return on the market portfolio is 16 percent, and Treasury bills currently yield 8 percent per annum. WWI one-year, $1,000 par value bonds carry a 7 percent annual coupon and are currently

Omega Corporation: What is after-tax WACC; what would WACC be with no debt?

Omega Corporation has 10 million shares outstanding, now trading at $55 per share. The firm has estimated the expected rate of return to shareholders at about 12 percent. It has also issued long-term bonds at an interest rate of 7 percent. It pays tax at a marginal rate of 35 percent. a. What is Omega's after-tax WACC? b. Ho

Determining the Cost of Capital

Case and additional information is attached. Case 19: Determining the Cost of Capital The Oceanic Corporation, a Chesapeake, VA based company, was established in 1994. Glenn Rodgers III founded the corporation, which was privately owned at the time, after his retirement from Norentech Corporation. Table 1 The Oceanic

Golden Fleece Financial

You are given the following information for Golden Fleece Financial. Long-term debt outstanding: $300,000 Current yield to maturity (r debt ): 8% Number of shares of common stock: 10,000 Price per share: $50 Book value per

Weighted Average Cost of Capital (WACC) explained in this solution

ABC Co. is estimating its WACC. Its target capital is 20 percent debt, 20 percent preferred stock, and 60 percent common equity. Its bonds have a 12 percent coupon, paid semi-annully, a current maturity of 20 years, and sell for $1,000. The company could sell, at par, $100 preferred stock which pays a 12 percent annual dividend,

Which of the following measures an organization's liquidity?

1. Which of the following measures an organization's liquidity? a. acid test ratio b. debt ratio c.. return on equity d. times interest earned e. return on assets 2. Which of the following is a method by which securities are distributed to final investors? a. negotiated purpose b. commission or best effort basi

Calculating WACC of Global Technology

Global Technology's capital structure is as follows: Debt 35% Preferred Stock 15% Common Stock 50% The cost of debt is 8 percent. The tax rate is 34 percent. The cost of preferred stock is 10 percent. The beta for the common stock is 1.4. The risk free rate is 4 percent and the risk premium is 7.5 percent. What