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Weighted Average Cost of Capital (WACC)

Return on Stock, WACC, Payout Ratio Questions

3. What is the percentage total return on a stock that had an initial price of $70 per share, paid a dividend of $2.50 per share for the year, and had an ending price for the year of $74.50? 5. What is the expected rate of return on a portfolio where 20% is invested in Stock X, 30% in Stock Y, and 50% in Stock Z if

AFN & WACC Calculations

1. Finegan Services Ltd. has the following year end balance: ($000) Cash $1,000 A/P $500 A/R 3,500 Accruals 2,000 Inventory 10,000 Long-Term Debt 15,000 Net Fixed Assets 23,000 Common Equity 20,000 Total Assets $37,500 Total Liabilities $37,500 FSL's fixed assets are currently being used at

Acquiring Tantrell Corporation

Tundra Corporation is interested in acquiring Tantrell Corporation. Tantrell has 2 million shares outstanding and a target capital structure consisting of 40 percent debt. The debt interest rate is 8 percent. Assume that the risk-free rate of interest is 3 percent and the market risk premium is 7 percent. Tantrell's fr

WACC of firm

A Company finances its projects with 40% debt, 10% preferred stock, and 50% common stock. - The company can issue bonds at a YTM of 8.4%. - The cost of preferred stock is 9%. - The risk-free rate is 6.57%. - The market risk premium is 5%. - Johnson Industries' beta is equal to 1.3. - Assume that the firm will be able to

Calculating Weighted Average Cost of Capital (WACC)

If a company finances its projects with 40 percent debt, 10 percent preferred stock, and 50 percent common stock. 1) The company can issue bonds at a yield to maturity of 8.4 percent. 2) The cost of preferred stock is 9 percent. 3) The company's common stock currently sells for $30 a sh

Total Market Value of a Firm

Total assets $3,000 million Tax rate 40% Operating income (EBIT) $800 million Debt ratio 0% Interest expense $0 million WACC 10% Net income $480 million M/B ratio 1.00x Share price $32.00 EPS = DPS $3.20 The company has no growth opportunities (g = 0), so the company pays out all of its earnings as dividends (EPS

Production Cost Report - Weighted Average Method

Production Cost Report - Weighted Average Method. Problem 8.42 Nader Paints makes an environmentally sound paint. The following data are available for the month of April: Beginning WIP inventory, April Direct materials Conversion costs Units started in April Costs incurred in April: Direct materials Conversion

Equivalent Units and Cost per Equivalent Unit - Weighted-Average Method

Exercise 4-8 - Equivalent Units and Cost per Equivalent Unit - Weighted-Average Method (L02, L04) Solex Company produces a high-quality insulation material that passes through two production processes. A quantity schedule for June for the first process follows: Quantity Schedule Units to be accounted for: Work

Weighted Average Cost of Capital

The following tabulation gives earnings per share figures for the Knerr Company during the preceding 10 years. The firm's common stock, 7.8 million shares outstanding, is now (1/1/2003) selling for $65 per share and the expected dividend at the end of the current year (2003) is 55 percent of the 2002 EPS. Because investors expec

Intrinsic Price Per Share and Current Market Price

You have been given the following projections for Moon Corporation for the coming year. Sales = 10,000 units Sales price per unit = $10 Variable cost per unit = $5 Fixed costs = $10,000 Bonds outstanding = $15,000 rd on outstanding bonds = 8% Tax rate = 40% Sha

Finance Issues

A few problems related to business finance. Problem Set 3: Ross: Chapter 3 - Problems: 3.2, 3.4 3.2 Cheryl Colby, the CFO of Charming Florist Ltd., has created the firm's pro forma balance sheet for the next fiscal year. Sales are projected to grow at 10 percent to the level of $330 million. Current assets, fixed assets,

Dividend Discount Model and WACC

1. In March 2004, Fly Paper's stock sold for about $73. Security analysts were forecasting a long-term earnings growth rate of 8.5 percent. The company is expected to pay a dividend of $1.68 per share a. Assume dividends are expected to grow along with earnings at g 8.5 percent per year in perpetuity. What rate of return r wer

Changes in Cost and Weighted Average Cost of Capital

WACC or weighted average cost calculation 20. Carr Auto Parts is trying to calculate its cost of capital for use in a capital budgeting decision. Mr. Horn, the vice-president of finance, has given you the following information and has asked you to compute the weighted average cost of capital. The company currently has outsta

WACC Problem

Please show formulas and solution on how to complete this one. Thanks A company's balance sheets show a total of $30 million long-term debt with a coupon rate of 9 percent. The yield to maturity on this debt is 11.11 percent, and the debt has a total current market value of $25 million. The balance sheets also show th

Alpha Signmaking - WACC, RR, NPV Calculations

Alpha Signmaking, the leading producer of laminated sign making equipment, spent 2 years and $3 million dollars developing a new semiautomatic signmaker. In 1988, the company was ready to make a decision about placing the new signmaker into production. This signmaker would fill the gap between a manual unit selling for $1,000

WACC and Hurdle rates

What is the relationship between hurdle rate and Weighted Average Cost of Capital (WACC)? Which type of risk is more difficult to minimize: systematic or unsystematic? Why? Given the choice, being a small business owner, having experienced success in the local market, and wishing to expand company operations on a greater s

WACC: Capital Structure and Equity

On January 1, the total market value of the Tysseland Company was $60 million. During the year, the company plans to raise and invest $30 million in new projects. The firm's present market value capital structure, shown below, is considered to be optimal. Assume that there is no short-term debt. Debt $30,00

WACC

Calculate the WACC for a firm with a debt-equity ratio of 1.5. The debt pays 6% interest and the equity is expected to return 8%. Assume a 35% tax rate and risk-free debt.

Weighted average cost of capital

The CEO needs you to calculate the company's weighted-average cost of capital (WACC). In addition to calculating the WACC, the CEO wants you to explain how the capital structure would need to change if the firm wanted to reduce its cost of capital. The CEO believes the company needs a split of 25% debt to 75% equity to have an o

WACC and optimal capital structure

Elliott Athletics is trying to determine its optimal capital structure, which now consists of only debt and common equity. The firm does not currently use preferred stock in its capital structure, and it does not plan to do so in the future. To estimate how much its debt would cost at different debt levels, the company's treasur

Multiple choice questions in Corporate Finance

12. The Horizon Company will invest $60,000 in a temporary project that will generate the following cash inflows for the next three years. Year Cash Flow 1. . . . . . . . . $15,000 2. . . . . . . . . 25,000 3. . . . . . . . . 40,000 The firm will also be required to spend $10,000 to close down the project at the end o

Weighted Average

(See attached file for full problem description with diagrams) --- 1. Wilson & Associates capital structure is as follows: The after-tax cost of debt is 6.5%; the cost of preferred stock is 10%; and the cost of common equity (in the form of retained earnings) is 13.5%. Calculate the weighted average cost of capital

Corporation Valuation

Please help with the following: Brook's Enterprises has never paid a dividend. Free cash flow is projected to be $80,000 and $100,000 for the next 2 years, respectively, and after the second year it is expected to grow at a constant rate of 8%. The company's weighted average cost of capital is WACC= 12% a) What is the te

Finance - Set 3, Prob #4

What is the weighted average cost of capital for a firm in the 35% corporate tax bracket, with the following: Financing Amount Rate of Interest for each. Equity $ 1,150,000 11.57% Debt $

Weighter average cost of Capital

WACC= (wd)(rd)(1-Tc)+(We)(re)+(Wp)(rp) Wd = weight of debt in a firm's capital structure rd = rate being paid for the firm's use of debt monies (marginal cost) Tc = corporate tax rate We = weight of equity re = rate of equity (sometimes calculated in CAPM) Wp = weight of preferred rp = rate being paid on preferred stock

WACC

I'm confused on this problem. I know you are supposed to get the cost(aftertax), multiply by the weight to get the weighted cost. Then add the weighted costs to arrive at the weighted average cost of capital. Smith and Jones Widget Company has total capital, consisting of long-term debt and common equity of $80 million. Thirt

WACC

The corporation has no debt but can borrow at 7%. The firms WACC is currently 10% with no corporate tax. 1. So what's the cost of equity? 2. Whats the cost of equity at 30% or 60% and what's the WACC? Thanks for the help!