XYZ Company has a target capital structure of 60% common stock, 30% debt, and 10% preferred stock. The company wishes to issue new bond ($1,000 par value) with 10% coupon rate and 30 years to maturity. The flotation costs will be $20 and the bond has to be sold at 5% discount. To issue new preferred stock the company has to pay
Identify some problem areas in the cost of capital analysis. Do these problems invalidate the cost of capital procedures?
Patton Paints Corporation has a target capital structure of 40 percent debt and 60 percent common equity, with no preferred stock. Its before-tax cost of debt is 12 percent, and its marginal tax rate is 40 percent. The current stock price is P0 = $22.50. The last dividend was D0 = $2.00, and it is expected to grow at a constant
You were hired as a consultant to Keys Company, and you were provided with the following data: Target capital structure: 40% debt, 10% preferred, and 50% common equity. The after-tax cost of debt is 4.00%, the cost of preferred is 7.50%, and the cost of retained earnings is 11.50%. The firm will not be issuing any new stock.
Several years ago the Haverford Company sold a $1,000 par value bond that now has 25 years to maturity and an 8.00% annual coupon that is paid quarterly. The bond currently sells for $900.90, and the company's tax rate is 40%. What is the component cost of debt for use in the WACC calculation?
Wagner Inc estimates that its average-risk projects have a WACC of 10%, its below-average risk projects have a WACC of 8%, and its above-average risk projects have a WACC of 12%. Which of the following projects (A, B, and C) should the company accept? a) Project A is of average risk and has a return of 9%.
Debt 35% preferred stock 15 common equity 50 The after-tax cost of debt is 6.5 percent; the cost of preferred stock is 10 percent; and the cost of common equity (in the form of retained earnings) is 13.5 percent.
Pepsi Co. currently is 100% equity financed. The company is considering changing its capital structure. More specifically, Pepsis' CFO is considering a recapitalization plan in which the firm would issue long-term debt with a yield of 9% and use the proceeds to repurchase common stock. The recapitalization would not change th
ABC is currently in the following situation: EBIT = $4.7 million Tax Rate = .40 D= $2 million rd=.10 RS=.15 Shares Outstanding = 600,000 Stack Price =$30 The debt is perpetual and all earning are paid out as dividends.(a) What are the total market value of the firm's stock and the fir
1. A firm with a corporate wide debt/equity ratio of 1:2, an after tax cost of debt of 7 percent, and a cost of equity capital of 15 percent is interested in pursuing a foreign project. The debt capacity of the project is the same as for the company as a whole, but its systematic risk is such that the required return on equity i
Question: Jack's Construction Co. has 80,000 bonds outstanding that are selling at par value. Bonds with similar characteristics are yielding 8.5%. The company also has 4 million shares of common stock outstanding. The stock has a beta of 1.1 and sells for $40 a share. The U.S. Treasury bill is yielding 4% and the market risk pr
See attached. Bonds 1. Using AT&T (NYSE: T) http://finance.yahoo.com/q?s=t, discuss and analyze the firm's outstanding bond issues. WACC 2. Using AT&T, collect the following information: a. Cost of debt, yield to maturity on bonds and the firm's tax rate. b. Cost of preferred stock, if any, computed using the divide
Global Technology's capital structure is as follows: Debt 35% Preferred Stock 15 Common Equity 50 The after-tax cost of debt is 6.5 percent; the cost of preferred stock is 10 percent; and the cost of common equity (in the form of retained earnings) is 13.5 percent. Calculate Global Technology's weighted average cost of
A firm's current balance sheet is as follows: Assets $100 Debt $10 Equity $90 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% 8% 12%
7. A firm has debt of $5,000, equity of $16,000, a cost of debt of 8%, a cost of equity of 12%, and a tax rate of 34%. What is the firm's weighted average cost of capital? 7.29% 7.94% 8.87% 10.40% 11.05%
1.Present Value and Discounting Discounting: How much is $1 that we receive in 2 years worth today (r=9%)? 2.How Long is the Wait? If we deposit $5000 today into an account paying 10%, how long do we have to wait for it to grow to $10,000? 2.What Rate is Enough? Assume the total cost of a college educatio
Please help me out with the following questions: 1- A company's fixed operating costs are $ 500,000, its variable costs are $ 3.00 per unit, and the products sales price is $ 4.00. What is the company's breakeven point; that is, at what unit sales volume would its income equal its costs? --- 2-Assuming that the firm use
Wagner Inc. estimates that its average-risk projects have a WACC of 10%, its below-average risk projects have a WACC OF 8%, and its above-average risk projects have a WACC of 12%. Which of the following projects (A, B, and C) should the company accept? Project A is of average risk and has a return of 9%, Project B is of below-
I need help with this assignment I am really lost. With the following data, calculate the individual cost for each security and the overall WACC. Percent of capital structure: Debt 35% Preferred stock 10% Common equity 55% Additional Information Bond
Present three forecasts, one that would result from the use of each of the following approaches (show all formulas): Calculate the appropriate naïve approach and list two or more advantages of using this approach. Compute a five-period moving average and list two or more advantages of using this approach. Compute a we
The following data summarizes the historical demand for a product Month Actual demand March 20 April 25 May 40 June 35 July 30 August 45 Use a weighted moving average method with weights w1 = .2, w2 = .3 and w3 = .5 and determine the forecasted demand for August and September.
Problem 10. (Section four) Calculating WACC. Find the WACC of William 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 1
The common stock of Buildwell Conservation & Construction, Inc., has a beta of .80. The Treasury bill rate is 4 percent and the market risk premium is estimated at 8 percent. BCCI's capital structure is 30 percent debt paying a 5 percent interest rate, and 70 percent equity. What is BCCI's cost of equity capital? It's WACC? Buil
Problem 11. WACC. Nodebt, Inc., is a firm with all-equity financing. Its equity beta is .80. The Treasury bill rate is 5 percent and the market risk premium is expected to be 10 percent. What is Nodebt's asset beta? What is Nodebt's weighted-average cost of capital? The firm is exempt from paying taxes.
Please assist me with at least 300 words to the following question. 1. Evaluate the long-term financial instruments and strategies that Google utilized in their corporate financial decision-making in 2007. Please attach any formulas or ratios in Excel. Thanks for the help.
Blanchford Enterprises is considering a project that has the following cash flow data. What is the project's IRR? Note that a project's projected IRR can be less than the WACC (and even negative), in
Blanchford Enterprises is considering a project that has the following cash flow data. What is the project's IRR? Note that a project's projected IRR can be less than the WACC (and even negative), in which case it will be rejected. Year: 0 1 2 3 Cash flows: -$1,000 $450
What is weighted moving average with weights w1= .2 w2= .3 and w3 =.5 and what is the forecast demand for August and September for the data below? Mar 20, Apr 25, May 40, Jun 35, Jul 30, Aug 45 I am not understanding how to get the actual demand for September. Is that needed?
Material is introduced at the beginning of the process in the Assembly Department. Conversion costs are applied uniformly throughout the process. As the process is completed, goods are immediately transferred to the finishing Department. Data for the Assembly Department for the month of July 2008 follow: Work in process, June
Farhat Wineries is a privately held (not publicly traded) firm with the following balance sheet: Farhat Wineries ($ in millions) Assets 100 Long-term debt 40 Equity 60 Total 100 Total 100 In addition, you obtain the following information: ? The debt consists of perpetual bonds (they pay interest forever, and never
Rollins Corporation is constructing its MCC schedule. Its target capital structure is 20 percent debt, 20 percent preferred stock, and 60 percent common equity. Its bonds have a 12 percent coupon, paid semiannually, a current maturity of 20 years, and sell for $1,000. The firm could sell, at par, $100 preferred stock which pays