Top managements measures your division's performance by calculating the division's return on investment (ROI), defines as division-operating income per period divided by division assets. Your division has done some quite well lately; its ROI is 30%. You believe the division should invest in a new product process, but colleague d
You are given the following net cash flows: Year Net Cash Flow ______ ______________ 0 $ 0 1 $ 1 2 $ 2,000 3 $ 2,000 4 $ 2,000 5 $ 0 6
Reuth Corporation is interested in acquiring Hyatt Corporation. Hyatt has 5 million shares outstanding and a target capital structure consisting of 35 percent debt. Reuth's debt interest rate is 10 percent. Assume that the risk-free rate of interest is 2 percent and the market risk premium is 8 percent. Hyatt's free cas
Peter's Audio Shop has a cost of debt of 7 percent, a cost of equity of 11 percent, and a cost of preferred stock of 8 percent. The firm has 104,000 shares of common stock outstanding at a market price of $20 a share. There are 40,000 shares of preferred stock outstanding at a market price of $34 a share. The bond issue has a
What is the weighted average cost of capital for a firm in the 35% corporate tax bracket, with the following: Financing Amount Rate of Interest for each. Equity $ 1,150,000 11.57% Debt $
WACC= (wd)(rd)(1-Tc)+(We)(re)+(Wp)(rp) Wd = weight of debt in a firm's capital structure rd = rate being paid for the firm's use of debt monies (marginal cost) Tc = corporate tax rate We = weight of equity re = rate of equity (sometimes calculated in CAPM) Wp = weight of preferred rp = rate being paid on preferred stock
I'm confused on this problem. I know you are supposed to get the cost(aftertax), multiply by the weight to get the weighted cost. Then add the weighted costs to arrive at the weighted average cost of capital. Smith and Jones Widget Company has total capital, consisting of long-term debt and common equity of $80 million. Thirt
The corporation has no debt but can borrow at 7%. The firms WACC is currently 10% with no corporate tax. 1. So what's the cost of equity? 2. Whats the cost of equity at 30% or 60% and what's the WACC? Thanks for the help!
What is the WACC for a corporation that faced a 45% tax rate? It is solely financed by stock. They have 100 shares of preferred stock that pay a dividend of $150 that has a rate of return of 12%. They have 100,000 shares of common stock that sell for $12. The expected return of the S&P 500 is 11% and 4% for T-bills. The corporat
1. The ABC Co. has no debt in its capital structure, a beta of 0.8, and raises all funds through sale of common stock. The current market rate for similar stock is 14% and the risk-free rate is 6%. The firm is considering a project with a return of 12.9%. Should it accept the project, and if so why (Show all work). 2. You ha
Poulsbo Manufacturing, ZInc. is currently an all-equity firm that pays no taxes. The market value of the firm's equity is $4 million. The cost of this unlevered equity is 15 percent per annum. Poulsbo plans to issue $700,500 in debt and use the proceeds to repurchase stock. The cost of debt is 4 percent semi-annually. A. Afte
There are only 3 questions with this case study. Please answer each question fully and completely showing all computations and support for your conclusions. Please be as in-depth as possible. (See attached file for full problem description)
MUST BE IN EXCEL FORMAT AND MUST SHOW ALL WORK Ramsey Data Systems is a large company with common stock listed on the New York Stock Exchange and bonds traded over-the counter. AS of the current blance sheet, it has three bond issues outstanding: Expiration $50 million of 9% s
What is the WACC for Lee Family Firms? Attatched is an excel template of the company information if you scroll all the way over. It has two projects: Francis Lightfoot and Richard Henry. The problem is #13 and the answer to the problem is 3.89%.
The following tabulation gives earnings per share figures for the Foust Company during the preceding 10 years. The firm's common stock, 7.8 million shares outstanding, is now (1/1/03) 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 expect
The weighted average cost of capital (WACC) reflects, on the average, the firm's cost of long-term financing. Given the costs of the specific sources of financing, how would you obtain the appropriate weights for use in calculating a firm's WACC? Spend a few moments considering this question
Why would a company face a marginal cost of capital schedule instead of a single weighted average cost of capital?
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
Hi, thanks for the guidance on calculating the WACC, i just need to know in regards to calculating the WACC; (1) Identify and critically discuss the assumptions that are made in using the weighted average cost of capital for discounted cash flow calculations. (2) Describe and discuss the practical problems that might be me
You will find the answer to this puzzling assignment inside... 1. Yield on company's preferred stock - 8% 2. Yield on company's debt - 10% 3. Required return on common stock and internal equity - 12% 4. Debt total - $5,000,000 5. Preferred stock current market value - $10,000,000 6. Common stock and retained earnings tot
With the provided information I need to figure what the WACC for this company is Debt: book value $200Million, market value $180 Million, Preferred Stock: book value $50Million, market value $58 Million Common Equity: book value $450 Million market value $600Million Some other characteristic of the company are: Tax ra
See *ATTACHED* file for complete details! This is a problem with many parts. The file is attached. I don't understand the problem. The section of the questions I need help with are #9-14. The other information that is needed for the problem is on the side bar. The answers are: 9. 36.43% 10. 5.03% 11. 12.50% 12
What is Wilson's Automotive Car Care's WACC if the cost of debt is 14%, the cost of equity is 26%, and it is 46% financed by debt (taxes are 7%)? Please use the equation WACC = [d/v x (1-tc)rdebt] + [e/v x requity] 1. How do you find the security of proportion of the firm's market value? 2. How do you find the required
1.Suppose a firm estimates its cost of capital for the coming year to be 10 percent. What are reasonable costs of capital for evaluating average-risk projects, high-risk projects, and low-risk projects? Assignment: Weighted Average Cost of Capital 2. The following tabulation gives earnings per share figures for the Foust
I need to know how to calculate the market value in order to calculate the WACC. PROBLEM 8% bonds that mature in 20 years $8000000 Ordinary shares $5000000 6% preference shares $ 2000000 The market value of bonds is currently $8440000 Shares currently quoted as $0.60 I believe the market value of bonds is the stat
How do I get the WACC for a company whose info is this: tax bracket: 30% %of company finaced by stock: 60% % of company financed by bonds: 25% % of company financed by preferred stocks: 15% Bond yield: 7% Preferred stock yield: 11%
1. Describe some situations where the weighted-average cost of capital (WACC) would be an inappropriate discount rate in the NPV calculation.? 2. What are some of the pitfalls in forecasting cash flow for a project? 3. How do you compensate for risk in the NPV calculation 4. What are some methods for hedging exchang
A process costing system was used for a department that began operations in January. Approximately the same number of physical units, at the same degree of completion were in work in process at the end of both January and February. Monthly conversion costs are allocated between ending work in process and units completed. Compare
Levitt Company uses a process costing system. All direct materials are added at the beginning of the process. Levitt's production quantity schedule for November is reproduced below. Units Work-in-process on November 1 (conversion 60% complete) 1,000 Units started during November 5,000 Total units to account for 6,000
McCoy, Inc., has equity with a market value of $40 million and debt with a market value of $20 million. The cost of the debt is 6 percent semi-annually. Treasury bills that mature in one year yield 5 percent per annum, The expected return on the market portfolio over the next year is 15 percent. The beta of McCoy's