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    Weighted Average Cost of Capital (WACC)

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    Cash Flow Valuation Models

    Estimate the cost of equity, WACC, and unlevered cost of equity. Use the same company you have been studying thus far. TARGET Find the beta for your company use: http://finance.yahoo.com/q/ks?s=AIG Estimate your company's cost of equity. Estimate your company's weighted-average cost of capital. Estimate your

    Equivalent Units and Cost per Equivalent Unit - Weighted-Average Method

    Exercise 4-8 - Equivalent Units and Cost per Equivalent Unit - Weighted-Average Method (L02, L04) Solex Company produces a high-quality insulation material that passes through two production processes. A quantity schedule for June for the first process follows: Quantity Schedule Units to be accounted for: Work

    Weighted Average Cost of Capital

    The following tabulation gives earnings per share figures for the Knerr Company during the preceding 10 years. The firm's common stock, 7.8 million shares outstanding, is now (1/1/2003) selling for $65 per share and the expected dividend at the end of the current year (2003) is 55 percent of the 2002 EPS. Because investors expec

    Intrinsic Price Per Share and Current Market Price

    You have been given the following projections for Moon Corporation for the coming year. Sales = 10,000 units Sales price per unit = $10 Variable cost per unit = $5 Fixed costs = $10,000 Bonds outstanding = $15,000 rd on outstanding bonds = 8% Tax rate = 40% Sha

    Finance Issues

    A few problems related to business finance. Problem Set 3: Ross: Chapter 3 - Problems: 3.2, 3.4 3.2 Cheryl Colby, the CFO of Charming Florist Ltd., has created the firm's pro forma balance sheet for the next fiscal year. Sales are projected to grow at 10 percent to the level of $330 million. Current assets, fixed assets,

    Masco Oil and Gas company

    Masco Oil and Gas company is very large with common stock listed in the NYSE and bonds traded over the counter, As the current balance sheet, it has three bond issues outstanding. 1. 150 mil of 10 percent series.................2015 2. 50 mil of 7 percent series...................2009 3. 75 mil of 5 percent series........

    Dividend Discount Model and WACC

    1. In March 2004, Fly Paper's stock sold for about $73. Security analysts were forecasting a long-term earnings growth rate of 8.5 percent. The company is expected to pay a dividend of $1.68 per share a. Assume dividends are expected to grow along with earnings at g 8.5 percent per year in perpetuity. What rate of return r wer

    Changes in Cost and Weighted Average Cost of Capital

    WACC or weighted average cost calculation 20. Carr Auto Parts is trying to calculate its cost of capital for use in a capital budgeting decision. Mr. Horn, the vice-president of finance, has given you the following information and has asked you to compute the weighted average cost of capital. The company currently has outsta

    WACC Problem

    Please show formulas and solution on how to complete this one. Thanks A company's balance sheets show a total of $30 million long-term debt with a coupon rate of 9 percent. The yield to maturity on this debt is 11.11 percent, and the debt has a total current market value of $25 million. The balance sheets also show th

    WACC

    Find the WACC of 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/share, and the cost of equity is 15%. The firm's bonds have a face value of $5 million and sell at a price of 110 percent of the face value. The yield to maturity on

    WACC

    Reactive Industries has the following capital structure. Its corporate tax rate is 35%. What is its WACC? Security Market Value Required Rate of Return Debt $20 million 6% Preferred stock $10 million 8% Common stock $

    WACC

    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 is 40%

    Capital Costs and Security

    Consider the data on the following data, calculate the individual costs for each security and the weighted average cost of capital. Then comment on your findings. Percent of capital structure: Debt 30% Preferred stock 15 Common equity

    Alpha Signmaking - WACC, RR, NPV Calculations

    Alpha Signmaking, the leading producer of laminated sign making equipment, spent 2 years and $3 million dollars developing a new semiautomatic signmaker. In 1988, the company was ready to make a decision about placing the new signmaker into production. This signmaker would fill the gap between a manual unit selling for $1,000

    WACC and Hurdle rates

    What is the relationship between hurdle rate and Weighted Average Cost of Capital (WACC)? Which type of risk is more difficult to minimize: systematic or unsystematic? Why? Given the choice, being a small business owner, having experienced success in the local market, and wishing to expand company operations on a greater s

    WACC: Capital Structure and Equity

    On January 1, the total market value of the Tysseland Company was $60 million. During the year, the company plans to raise and invest $30 million in new projects. The firm's present market value capital structure, shown below, is considered to be optimal. Assume that there is no short-term debt. Debt $30,00

    WACC calculation given company information

    Given: * Company debt and other long-term obligations are US$14 million. The split for the US$14 million is US$5 million in bonds that are at 8% and US$9 million in a long-term loan at 7.5% * Company equity is US$150.1 million. * Cost equity (according to SML) is 9%. * The company is in the 40% tax bracket. Calculate t

    Which Plane Company to Choose

    Zappe Airlines is considering two alternative planes. Plane A has an expected life of 5 years, will cost $100 million, and will produce net cash flows of $30 million per year. Plane B has a life of 10 Years, will cost $132 million, and net cash flows of $25 million per year. The company's WACC is 12%. Which plane should the

    WACC

    Calculate the WACC for a firm with a debt-equity ratio of 1.5. The debt pays 6% interest and the equity is expected to return 8%. Assume a 35% tax rate and risk-free debt.

    Weighted average cost of capital

    The CEO needs you to calculate the company's weighted-average cost of capital (WACC). In addition to calculating the WACC, the CEO wants you to explain how the capital structure would need to change if the firm wanted to reduce its cost of capital. The CEO believes the company needs a split of 25% debt to 75% equity to have an o

    WACC and optimal capital structure

    Elliott Athletics is trying to determine its optimal capital structure, which now consists of only debt and common equity. The firm does not currently use preferred stock in its capital structure, and it does not plan to do so in the future. To estimate how much its debt would cost at different debt levels, the company's treasur

    McCoy problem

    Week 4 - Problem 3 McCoy, Inc., has equity with a market value of $37 million and debt with a market value of $19 million. The cost of the debt is 7 percent semi-annually. Treasury bills that mature in one year yield 5.5 percent per annum, and the expected return on the market port

    WACC Calculation of Common Stock

    A firm has 2,000,000 shares of common stock outstanding with a market price of $2.00 per share. It has 2,000 bonds outstanding, each selling for $1,200. The bonds mature in 15 years, have a coupon rate of 10% and pay coupons annually. The firm's beta is 1.2, the risk free rate is 5%, and the market risk premium is 7%. The tax ra

    Multiple choice questions in Corporate Finance

    12. The Horizon Company will invest $60,000 in a temporary project that will generate the following cash inflows for the next three years. Year Cash Flow 1. . . . . . . . . $15,000 2. . . . . . . . . 25,000 3. . . . . . . . . 40,000 The firm will also be required to spend $10,000 to close down the project at the end o

    Weighted Average

    (See attached file for full problem description with diagrams) --- 1. Wilson & Associates capital structure is as follows: The after-tax cost of debt is 6.5%; the cost of preferred stock is 10%; and the cost of common equity (in the form of retained earnings) is 13.5%. Calculate the weighted average cost of capital

    Corporation Valuation

    Please help with the following: Brook's Enterprises has never paid a dividend. Free cash flow is projected to be $80,000 and $100,000 for the next 2 years, respectively, and after the second year it is expected to grow at a constant rate of 8%. The company's weighted average cost of capital is WACC= 12% a) What is the te

    Leases R Us, Inc Problem?Calculating Annual Payments

    (See attached file for full problem description) Leases R Us, Inc Problem?Calculating Annual Payments. Leases R Us, Inc. (LRU) has been contracted by Robotics of Beverly Hills (RBH) to provide lease financing for a machine that would assist in automating a large part of their current assembly lin

    Cost of capital

    Please solve the following: A) David Ortiz Motors has a target capital structure of 40$ debt and 60% equity. The yield to maturity on the company's outstanding bonds is 9%, and the company's tax rate is 40%. Ortiz's CFO has calculated the company's WACC as 9.96%. What is the company's cost of equity capital? B) On J