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Weighted Average Cost of Capital (WACC)


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,

Weighted Average Cost of Capital WACC

For this problem what the debt and equity has to do with the rd? A company has determined that its optimal capital structure consists of 40% debt and 60% equity. Assume the firm will not have enough retained earnings to fund the equity portion of its capital budget, and the cost of capital is adjusted to account for flotation

Speedy Delivery Systems - Weighted Average Cost of Capital

Speedy Delivery Systems can buy a piece of equipment that is anticipated to provide an 8 percent return and can be financed at 5 percent with debt. Later in the year, the firm turns down an opportunity to buy a new machine that would yield a 15 percent return but would cost 17 percent to finance through common equity. Assume deb

Mullineaux's WACC

Mullineaux Corporation has a target capital structure of 50 percent common stock, 5 percent preferred stock, and 45 percent debt. Its cost of equity is 15 percent, the cost of preferred stock is 6 percent, and the cost of debt is 8 percent. The relevant tax rate is 35 percent. a. What is Mullineaux's WACC? b. The company

Dell Computers: The Cost of Capital (WACC)

Based on the attached Dell Computers annual reports, answer the following question: a. Compute the weighted average cost of capital (WACC) for both years. b. Discuss your findings and how the weighted average cost of capital can impact the company's financial standing.

WACC: Weighted Average Cost of Capital

Jungle, Inc., has a target debt;equity ratio of 0.81. Its WACC is 10.5 percent, and the tax rate is 34 percent. (Do not include the percent sign (%). Round your answers to 2 decimal places, e.g. 32.16.) Required: (a) If Jungle's cost of equity is 16.5 percent, its pretax cost of debt is _____ percent. (b) If instead

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

Weighted average cost of capital ....

A firm has determined its cost of each source of capital and optimal capital structure, which is composed of the following sources and target market value proportions: Target market Source of capital proportions After tax cost ______________________________________________________ Long t

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

Weighted Average Beta

My company multidivisional utility company. I have four divisions with the following betas and proportions of the firm's total assets: Division Beta % of Assets Electric & Gas 0.85 60 Bus transportation 0.95 10 Real estate 1.40 25 Recreation 1.15 5 What is the my company's weighted average beta?

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

Weighted-Average Method - Bertoli Company

Bertoli Company has a process costing system in which the weighted-average method is used. the company adds all materials at the beginning of the process in the Assemby Department, which is the first of two stages of its production process. Information concerning the materials used in the Assembly Department during August is as

Cost of Capital and Pro Forma Balance Sheet

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%

Roles of Financial Institutions in Financial Intermediation

What roles do financial institutions play in financial intermediation? Why are these roles necessary? How should the company respond to the increased intermediation scrutiny due to the company IPO? What are common stocks? How do common stocks differ from preferred stocks? How is the value of a common stock calculated? Discuss th

Weighted Average Method

Benal Inc. uses the weighted average method in it process costing system. The following data concern the operations of the company's processing department for a recent month. Work in process, beginning: units in process... 300 percent complete with respect to materials... 60% percent complete with respect to conversion...

EPS and Optimal Debt Ratio

I need some help in estimating the Optimal Debt Ratio with steps. DEBT RATIO EPS STANDARD DEVATION OF EPS 0% $2.30 $1.15 20% $3.00 $1.80 40% $3.50 $2.80 60% $3.95 $3.95 80% $3.80 $5.53 Estimate the optimal debt ratio on the basi

A Company's Weighted Average Cost of Capital

In a company with the following known information what is the Weighted Average Calculation of Capital (WACC): After tax cost of debt 6%, cost of preferred stock including flotation cost is 10%, cost of equity including flotation cost is 14%, and the company has a target capital structure of 50% equity, 20% preferred stock, and

Five-year weighted moving average

2. The yield on a 30 year treasury note at the end of each year since 1990 is recorded below. Compute a five-year weighted moving average using weights of .1, .2, .3 and .3 respectfully. Describe the trend in yield. 1990 8.61 1991 8.14 1992 7.67 1993 6.59 1994 7.37 1995 6.88 1996 6.71 1997 6.61 1998 5.58 1999 5.87