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Weighted Average Cost of Capital (WACC)

Computation of WACC

Question: Wippet Industries (WI) has a book value capital structure as shown below. - Bonds pay annual coupons of $91 - Have 6 years to go until they mature - Have a YTM of 7% - Stock sells for $22 per share - Has a beta of 1.39 - Expected return on the market is 12% - t-bills pay 3.3%. - Taxes are 32%. What is t

Calculate the Weighted average cost of capital

I am trying to complete this practice problem in preparation for a final assignment. I would like to see it done correctly so i can point out where i am going wrong Calculate the cost of capital (show calculations) for Harley Davidson using the Weighted average cost of capital method using the following information from

Dell: Estimate total market value, cost of debt and equity, WACC

I really need help with this assignment. We were given 7 firms and we must answer the three questions based on the information we find on Yahoo! Finance or any other financial website. I don't have a good foundation on the subject. If someone can be kind enough to answer the 3 questions for 1 firm, I can use that as a guide t

Capital Budgeting, Cost of Capital , Cash Flow, Risk

1. Your boss is considering borrowing $10,000 from a bank at 8% for a project. She has determined that the rate of return on the project is expected to be 12%. She comments that since the project is earning more than the cost of the debt, it should definitely be undertaken. You assert that the company's average cost of cap

Rayburn Manufacturing Inc- Repurchase of Stock

Rayburn Manufacturing Inc Market Value of Equity: $2,000,000.00 Cost of unlevered equity: 18.00% Cost of debt: 10.00% Planned issuance of debt: $400,000.00 A - After Rayburn repurchases the stock, what will the firm's WACC be? B - After the repurchase, what will the cost of equity be? Explain. C - U

Capital Structure

Acetate Inc. Problem 15.2 Acetate's Value: $30,000,000.00 Equity: $20,000,000.00 Debt: $10,000,000.00 Cost of Debt: 14.00% T-Bills: 8.00% yield Expected Return on Portfolio: 18.00% Beta: 0.9 A- What is Acetate's Debt-Equity Ratio? B - What is the firm's WACC? 16.67% WACC Formula = B/B+S*rb +

WACC Calculation for Copernicus Inc

Copernicus Inc. has determined that its target capital structure will be 60% debt, 10% preferred stock, and 30% common stock. As the financial manager, the CFO has informed you that the company's before tax cost of debt is 10%, preferred stock is 14%, and common stock is 16%. In addition, the company's marginal tax rate

Calculate Current Price of Stock; Calculate WACC

The last dividend paid by a company was $2.20. Klein's growth rate is expected to be 10 percent for one year, after which dividends are expected to grow at a rate of 6 percent forever. The company's stockholders require a rate of return on equity (rs) of 11 percent. What is the current price of the stock? a. $44.00 b. $4

Free Cash Flow

Suppose a company's most recent free cash flow (i.e., yesterday's free cash flow) was $100 million and is expected to grow at a constant rate of 5 percent. If the company's weighted average cost of capital is 15 percent, what is the current value of operations? a. $ 913 million b. $1,000 million c. $1,050 million d. $1,5

Multiple choice

This is an old 2000 fall exam that will be used to study for a departmental final. I just need the multiple choice answers. I do not need the 'work' shown as I will do that, just need something to let me know if the answer is right. There are 40 questions ranging from easy to average in difficulty, as this is an intro t

Calculate the firm's weighted average cost of capital (WACC)

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. Also, assume the firm accounts for flotation costs by adjusting the cost of capital. Given the following information, calculate

Solve for Weighted-Average Cost of Capital (WACC)

Find the WACC KNOWN: Book value of firms equity $10,000,000 Book value per share $20 Stock Sales Price / per share $30 Cost of Equity 15% Bonds par value $5,000,000 Sell price % of Par (Bonds) 110% Yield to Maturity (Bonds) 9% Firms Tax Rate 40% Market Value Debt FORMULA Equity FORMULA Total $0

I need help figuring out a formula in WACC

I need your help with this formula: WACC=50x0.12+10x0.08+20X0.06x(1-0.35)=$7.58 Million My first question is where does the 1 come from and how do I calculate the figures in parenthesis? And can you help me with the rest of the problem. Thank you your help is GREATLY appreciated.

I need your help finding the answwes in calculating WACC.

I need your help with this problem. How do I calculate WACC; Reactive Industries has the following capital structure. Its corporate tax rate is 35 percent. What is its WACC? SECURITY MARKET VALUE REQUIRED RATE OF RETURN DEBT $20 Million 6% PREFERRED STOCK $10 Million

Problem

Which of the following is not a value driver in the corporate valuation model? a. Sales growth. b. The WACC. c. Earnings per share d. Capital requirements. e. Operating profitability

Business Finance: NPV, WACC (Weighted Averege Cost of Capital), Unlevered Beta

Can you show me step by step instructions on how to solve these four problems and put them in an excel spreadsheet so that I can click on the cells and see the calculations: 1. It is January 1, 2005. Bethesda Manufacturing Company (BMC) is considering the purchase of a new fabrication machine for $2,500,000 with a 5 year MACR

Capital Structure and Weighted Average Cost of Capital

In computing the cost of capital, do we use the historical costs of existing debt and equity or the current costs as determined in the market? Why? Why is the cost of debt less than the cost of preferred stock if both securities are priced to yield 10 percent in the market? Why is the cost of issuing new common stock (K

WACC Corrections- Case study-Sea Shore Salt This cost of equity was significantly less than the 16 percent decreed in Mr. Brinepool's memo. Bernice scanned her notes apprehensively. What if Mr. Brinepool's cost of equity was wrong? Was there some other way to estimate the cost of equity as a check on the CAPM calculation? Could there be other errors in his calculations?

Bernice Mountaindog was glad to be back at Sea Shore Salt. Employees were treated well. When she had asked a year ago for a leave of absence to complete her degree in finance, top management promptly agreed. When she returned with an honors degree, she was promoted from administrative assistant (she had been secretary to J

Weighted average cost of capital

Please compute the Weighted Average Cost of Capital. for Gold Coast Homecare based on the assumptions presented in the case. You only need to compute the overall cost of capital, not the divisional cost of capital. You also do not need to compute the not-for-profit hospital?s home health care business cost of capital.

This is for Accounting

I'm not taking Accounting now. But i will be taking it in Fall. This is just for my presonal learning Thanks

A company's tax rate is 35%, what is the WACC using the followiong info:

A company's tax rate is 35%, what is the WACC using the followiong info: Debt: 6,000 9% coupon bonds outstanding, $1000.00 par value, 10 years to maturity, selling for 104% of par, the bonds make seminannual payments. Common stock: 90,000 shares outstanding, selling for $75.00 per share, beta is 1.20 Preferred Stock: 8,00

Cost of debt, required return, WACC

1) 10 year bonds have YTM of 9.186%. The company can sell new 10 year bonds to provifr this same interest rate, but flotation costs will be 5%. Calculate after tax cost of existing debt & after tax cost of new debt. 2) Few friends are planning to open a restaurant. Each friend has to invest $20,000 for euity capital. Tom is c

Weighted-Average of Outstanding Shares with a Share Dividend

I don't understand the effect of the Share Dividend Column ... {please see attachment} I don't understand the effect of the Share Dividend Column - how do they get 1.10? And how come in December they only have it 1, not 1.10? Time Period Outstanding Shares Effect of Share Dividend Fraction of year Weighted Average Jan-M