Question1 A company issues 15-year, $1,000 par-value bonds, with a coupon rate of 6%. The bonds are sold for $619.70. The tax rate is 45%. Compute the cost of debt before taxes and after taxes Question2 Suppose a company issues common stock to the public for $50 a share. The expected dividend is $3.50 per share and the grow
1.(Defining Capital structure weights)Company is considering the acquisition of a chain of cemeteries for $430 million. Since the primary asset of this business is real estate, the company?s management has determined that they will be able to borrow the majority of the money needed to buy the business. The current owners have no
(Cost Per EUP; weighted average) Flickering Figurines manufactures wax figurines. In October 2003, company production is 26,800 equivalent units for direct materials, 24,400 equivalent units for labor, and 21,000 equivalent units for overhead. During October, direct material, conversion, and overhead costs incurred are as follow
Discuss the Weighted Average Cost of Capital (WACC) and the factors that affect it. Why is the emphasis on cash flow instead of net income in capital budgeting? How does capital budgeting relate to WACC? Finally, discuss risk analysis in capital budgeting and how you should address it in making a decision (as a manager)
I am stumped and need some help. I would like you to do the entire problem but PLEASE show all your work so I can understand what is necessary to learn to do this. The word doc is the problem and the Excel doc is the template I would like it finished in. Start with the partial model in the file Ch13 P11 Build a Model.xls o
6. THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 6 THROUGH 8. American Water Company, Inc. has two sources of funds: long-term debt with a market and book value of $10 million issued at an interest rate of 10%, and equity capital that has a market value of $10 million (book value of $8 million). American Water Company has sub
Geller Manufacturing uses a process cost system to manufacture sensors for the security industry. The following information pertains to operations for the month of March. Units Beginning work-in-process inventory, March
Completing the four steps necessary to prepare a production cost report. Calculate equivalent units of production using the weighted-average method. Compare the weighted average method of calculating equivalent units of production to the FIFO method.
I need help in how to approach the following question: Bicnell Corporation manufactures water skis through two processes. Molding and Packaging. In the Molding Department fiberglass is heated and shaped into the form of a ski. In the Packaging Department, the skis are placed in cartons and sent to the finishing goods wareh
I need some help with the following scenario: Suppose that a firm is at its target capital structure of 40% debt and 60% equity. It has bonds outstanding that mature in 10 years with annual coupon payments of 10% of par value of $1,000. The bonds are currently priced at $1,100. The market risk premium is 5% and the risk fr
In what situations should the WACC and the APV be used? How do personal taxes affect the use of these two methods?
Using the attached valuation spreadsheet as a model, values the AVX Corporation. Replace the values in the spreadsheet for the values of AVX Corp. I have attached also the AVX Corporation's financial information. INPUTS FOR VALUATION Current Inputs Enter the current revenues of the firm = $12,406
Golden Gate Construction Associates: Calculate the economic value added (EVA) for each of Golden Gate Construction Associates'divisions.
Golden Gate Construction Associates, a real estate developer and building contractor in San Francisco, has two sources of long-term capital: debt and equity. The cost to Golden Gate of issuing debt is the after-tax cost of the interest payments on the debt, taking into account the fact that the interest payments are tax deductib
Please see attached document for the question.
I need to find the WACC (all three) for PG&E, which is a power company in northern California. Their website is pge.com. I have been trying to do it on my own, but somehow the numbers don't match up. 1. What is the WACC of PG&E Corp. (PCG)? 2. What is PG&E's target capital structure
Exercise 1 The Director of Finance of Neolpharm Corporation needs to obtain financing for a major project expansion of the Corporation and is looking various alternatives, such as issue common Stocks, Preferred stocks and Debts (bonds). But he wants to obtain the Optimal Range of Financial Leverage. He is considering three alte
1. The 10 year US Treasury bond market rate is 5%, the stock market risk premium is 6%, and a company's beta is 1.5. Use the CAPM to calculate the required return for that company's stock; then briefly explain the logic of this calculation. 2. Keep all of the assumptions from quetion 1 and add the following: The company ha
Consider the following information for Evenflow Power Co., Debt: 2,500 7.5 percent coupon bonds outstanding, $1,000 par value, 20 years to maturity, selling for 103 percent of par; the bonds make semiannual payments and have a YTM of 7.21%. Common stock: 52,500 shares outstanding, selling for $61 per share; the bet
19.Determine what the Beta is for a firm that has the following characteristics: (a) Expected Return on the Company's Stock is 13%, (b) Risk Free Rate of Return is 3%, and (c) The Market's Return is expected to be 10%. 20. Using the 'constant growth model', determine what the investor's required rate of return is given the fo
9. As a general rule, the capital structure that maximizes firm value, or stock price also a. mximizes the expected rate of return on equity (ROE) b. maximizes the weighted average cost of capital (WACC) c. minimizes the weighted average cost of capital (WACC) d. maximizes EPS e. minimizes bankruptcy costs
6. Financial leverage affects both EPS and EBIT. a. true b. false 8. If debt financing is used, which of the following is true? a. In response to a given percentage change in sales, the percentage change in operating income is greater than the percentage change in net income. b. In response to a given percentage
What is the main difference WACC and APV methods?
1.Calculate Company A's weighted average cost of debt, given the following information: (a) Tax Rate: 25%, (b) Average Price of Outstanding Bonds: $975, (c) Coupon Rate: 4%, (d) NPER: 25, (e) Debt: $23,000,000, (f) Equity: $20,000,000, and (g) Preferred Stock: $10,000,000. 2.Calculate Company B's weighted average cost of equ
Determine the WACC for the Firm: Calculate your 'best' estimate of the Weighted Average Cost of Capital (WACC) for the firm. In order to complete this task, you will need to do the following: Determine the cost of debt: Please explain the approach and procedure you use to make this determination. Determine the cost o
Cypress Corporation has a target capital structure of 60% debt, 15% preferred stock, and 25% common stock. Currently Cypress has a capital structure of 75% debt, 10% common stock, and 15% preferred stock. The after tax cost of debt is 6%. The preferred stock has a par value of $100 per share, a $9 per share dividend, and a market price of $80 per share. The common stock of Cypress trades at $84 per share and has a projected dividend (D1) of $3.36. The stock price and dividend are expected to continue to grow at 12% for the foreseeable future. The CFO expects the company to have $590,000 available from retained earnings. What is the weighted average cost of capital (WACC) for Cypress? a. 8.95% b. 9.29% c. 9.41% d. 11.08%
10. Cypress Corporation has a target capital structure of 60% debt, 15% preferred stock, and 25% common stock. Currently Cypress has a capital structure of 75% debt, 10% common stock, and 15% preferred stock. The after tax cost of debt is 6%. The preferred stock has a par value of $100 per share, a $9 per share dividend, and a
WACC, EVA & MVA Use the selected statistics from the table below. Your company's name is Digby. Part I: Calculate your company's Weighted Average Cost of Capital in Year 2. In calculating cost of equity, use the CAPM. In the CAPM, use 6.0% for the risk free rate, 5.0% for the market risk premium, and assume your company is r
3. Hatteburg Company uses the weighted-average method in its process costing system. The following data about one of its processing department were taken from the company's accounting records: The department's ending work in process inventory consisted of 36,000 units. The units in the ending work in process inventory were 100
1) International investment returns Joe Martinez, a U.S. citizen living in Brownsville, Texas, invested in the common stock of Telmex, a Mexican corporation. He purchased 1,000 shares at 20.50 pesos per share. Twelve months later, he sold them at 24.75 pesos per share. He received no dividends during that time. a. What was Jo
Can you help me with the following assignment/project? 1. As the new chief financial officers (CFO) of Q & R Manufacturing, the chief executive officer (CEO) reminded you that you are expected to try and adjust the firm's capital structure to lower its weighted average cost of capital (WACC). He asks you to address a number o
Using the same public firm (WAL-MART), compute the weighted average cost of capital (WACC). Equity market values (capitalization or cap value) for your company can be found on any financial website like Yahoo Finance among others. For the cost of equity, use the CAPM rate calculated in week 2. Assume the market value of
Reacher Technology has consulted with investment bankers and determined the interest rate it would pay for different capital structures, as shown below. Data for the risk-free rate, the market risk premium, an estimate of Reacher's unlevered beta, and the tax rate are also shown below. Based on this information, what is the firm's optimal capital structure and what is the weighted average cost of capital at the optimal structure? Percent Financed with Debt (wd) Before-tax Cost Debt (rd) Input Data Risk-free rate 4.5% Market risk premium 5.5% Unlevered beta 0.8 0% 6.0% Tax rate 40.0% 10% 6.1% 20% 7.0% 30% 8.0% 40% 10.0% 50% 12.5% 60% 15.5% 70% 18.0% Fill in formulas in the yellow cells to find the optimum capital structure. Debt/Value Equity/Value Debt/Equity A-T Cost of Levered Cost of Ratio (wd) Ratio (ws) Ratio (wd/ws) Debt (rd) Beta Equity WACC 0% 1.0 0.00 10% 0.9 0.11 20% 0.8 0.25 30% 0.7 0.43 40% 0.6 0.67 50% 0.5 1.00 60% 0.4 1.50 70% 0.3 2.33 WACC at optimum debt ratio = Optimum debt ratio =
See attached file. Chapter 15. Ch 15-12 Build a Model Reacher Technology has consulted with investment bankers and determined the interest rate it would pay for different capital structures, as shown below. Data for the risk-free rate, the market risk premium, an estimate of Reacher's unlevered beta, and the
A company you are researching has common stock with a beta of 1.25. Currently, Treasury bills yield 4%, and the market portfolio offers an expected return of 13%. The company finances 20% of its assets with debt that has a yield to maturity of 6%. The firm also uses preferred stock to finance 30% of its assets. The preferred sto