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Weighted Average Cost of Capital (WACC)

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


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


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!

Short Financial Management Case Study: Cost of Capital

There are only 3 questions with this case study. Please answer each question fully and completely showing all computations and support for your conclusions. Please be as in-depth as possible. (See attached file for full problem description)

Cost of Capital

MUST BE IN EXCEL FORMAT AND MUST SHOW ALL WORK Ramsey Data Systems is a large company with common stock listed on the New York Stock Exchange and bonds traded over-the counter. AS of the current blance sheet, it has three bond issues outstanding: Expiration $50 million of 9% s

WACC problem

What is the WACC for Lee Family Firms? Attatched is an excel template of the company information if you scroll all the way over. It has two projects: Francis Lightfoot and Richard Henry. The problem is #13 and the answer to the problem is 3.89%.

Weighted Average Cost of Capital

The weighted average cost of capital (WACC) reflects, on the average, the firm's cost of long-term financing. Given the costs of the specific sources of financing, how would you obtain the appropriate weights for use in calculating a firm's WACC? Spend a few moments considering this question

Calculate the post tax WACC (for two scenarios)

You will find the answer to this puzzling assignment inside... 1. Yield on company's preferred stock - 8% 2. Yield on company's debt - 10% 3. Required return on common stock and internal equity - 12% 4. Debt total - $5,000,000 5. Preferred stock current market value - $10,000,000 6. Common stock and retained earnings tot

Cost of Capital problem

See *ATTACHED* file for complete details! This is a problem with many parts. The file is attached. I don't understand the problem. The section of the questions I need help with are #9-14. The other information that is needed for the problem is on the side bar. The answers are: 9. 36.43% 10. 5.03% 11. 12.50% 12

WACC problem

What is Wilson's Automotive Car Care's WACC if the cost of debt is 14%, the cost of equity is 26%, and it is 46% financed by debt (taxes are 7%)? Please use the equation WACC = [d/v x (1-tc)rdebt] + [e/v x requity] 1. How do you find the security of proportion of the firm's market value? 2. How do you find the required

Answer question 1 and question #2(a,b)

1.Suppose a firm estimates its cost of capital for the coming year to be 10 percent. What are reasonable costs of capital for evaluating average-risk projects, high-risk projects, and low-risk projects? Assignment: Weighted Average Cost of Capital 2. The following tabulation gives earnings per share figures for the Foust

Calculate the WACC

I need to know how to calculate the market value in order to calculate the WACC. PROBLEM 8% bonds that mature in 20 years $8000000 Ordinary shares $5000000 6% preference shares $ 2000000 The market value of bonds is currently $8440000 Shares currently quoted as $0.60 I believe the market value of bonds is the stat

Finance Questions

1. Describe some situations where the weighted-average cost of capital (WACC) would be an inappropriate discount rate in the NPV calculation.? 2. What are some of the pitfalls in forecasting cash flow for a project? 3. How do you compensate for risk in the NPV calculation 4. What are some methods for hedging exchang

Managerial Accounting

A process costing system was used for a department that began operations in January. Approximately the same number of physical units, at the same degree of completion were in work in process at the end of both January and February. Monthly conversion costs are allocated between ending work in process and units completed. Compare

Managerial Accounting

Levitt Company uses a process costing system. All direct materials are added at the beginning of the process. Levitt's production quantity schedule for November is reproduced below. Units Work-in-process on November 1 (conversion 60% complete) 1,000 Units started during November 5,000 Total units to account for 6,000

Calculate McCoy's debt-equity ratio and WACC (weighted average cost of capital)

McCoy, Inc., has equity with a market value of $40 million and debt with a market value of $20 million. The cost of the debt is 6 percent semi-annually. Treasury bills that mature in one year yield 5 percent per annum, The expected return on the market portfolio over the next year is 15 percent. The beta of McCoy's

Zinger Corporation manufactures industrial type sewing machines...

Please answer questions 26-29 based on the following information: Zinger Corporation manufactures industrial type sewing machines. Zinger Corp. received a very large order from a few European countries. In order to be able to supply these countries with its products, Zinger will have to expand its facilities. Of the required

WAAC Problem

A. What are the effects of a corporate tax on the WACC of businesses? B. Is minimizing WACC by having a largely debt-based capital structure a high risk strategy, given the threat of bankruptcy in an overleveraged business? Explain. C. What are extraneous factors which impact the ability of a business to radically aft

Cost Accounting Question

Pampin Company uses the weighted-average method in its process costing system. The Molding Department is the second department in its production process. The data below summarize the department's operations in January. Units Percentage complete Beginning work in process inventory 9,600 50% Transferred in from the

Solving for WACC and the Cost of Equity

Poulsbo Manufacturing, Inc. (Adair Imaging) is currently an all-equity firm that pays no taxes. The market value of the firm's equity is 3 million. The cost of this unlevered equity is 15 percent annum. Poulsbo plans to issue 600000 in debt and use the proceeds to repurchase stock. The cost of debt is 4% semi annually. Qu

International finance

1. Novo's cost of equity prior to April of 1980 Assume that the following data apply and calculate Novo's cost of equity: Danish Krf=10% Demark purpose maintained high real rates of interest to protect its exchange rate Novo's β=1.0 The Danish market did not distinguish between growth stocks and other industrial stick

Calculate EVA

Company A has a WACC of 10%. The income statement is below: Sales $10 million Operating Costs $6 million __________ Operating Income (EBIT) $4.0 million Interest Expense

I need to help in understanding WACC

I am doing some research on WACC and the effects it has on debt. Can you please help me understand this subject by answering the following questions? Can one minimize WACC when there is a constraint on raising debt? If so, how? What are the effects of a corporate tax on the WACC of a business?

Find the WACC of William (Apple) Tell Computers

Find the WACC of William (Apple) Tell Computers. The total book value of the firm's equity is $10 million; book value per share is $20. The stock sells for a price of $30 per share, and the cost of equity is 15 percent. The firm's bonds have a par value of $5 million and sell at a price of 110 percent of par. The yield to maturi