HBT Corporation has never paid a dividend. Its current free cash flow is $1,200,000 and is expected to grow at a constant rate of 4%. The WACC is 10%. What is HBT's value of operations (in millions)? a. $22.00 b. $20.80 c. $12.48 d. $20.00 e. $10.00
Which of the following statements is most correct? a. When a company increases its debt ratio, the costs of equity and debt capital both increase. Therefore, the weighted average cost of capital (WACC) must also increase. b. The capital structure that maximizes stock price is generally the capital structure that also maxi
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
The WACC is both a marginal and an average concept? Explain?
On January 1, the total market value of the Tyseeland 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: $30,000,000 Common equi
1. A consultant has collected the following information regarding Young Publishing: Total assets $3,000 million Tax rate 40% Operating income (EBIT) $800 million Debt ratio 0% Interest expense $0 million WACC 10% Net income $480 million M/B ratio 1.00× Share price $32.00 EPS = DPS $3.20 Th
Find WACC of William 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 per share, and the cost of equity is 15%. The firm's bond have a par value of $5 million and sell at a price of 110% of par. The yeild to maturity on the bonds is 9 pe
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
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?
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
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 8% Common stock
Target capital structure will be at 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 at 14% and common stock is 16%. In addition, the company's marginal tax rate is 40%. Based on the info provided, calc
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.
Financial Management 2 Cost of capital Problem At the end of 199x Caribbean yachting products had $ 100 million total net assets. Management desires to increase its production machinery during 199x by $20 million in order to provide for new product lines. Bond financing will be at an 8% rate and will sell at par. Preferred
5. Consider the following information: Rate of return if state occurs State of Probability of Economy State of Economy Stock R Stock S Stock T Boom .25 .30 .40 .25 Good .40 .10
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
6.20 Here are the cash flows for two mutually exclusive projects: Project C0 C1 C2 C3 A ($20,000) $8,000 $8,000 $8,000 B ($20,000) 0 0 $25,000 a. At what interest rates would you prefer project A to B? b. What is the IRR of each project? 7.21 Revenues generated by a new fad product in ea
See the attached file. 1) 10 year bonds have YTM of 9.186%. The company can sell new 10 year bonds to provide 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
1. Johnston Corporation is growing at a constant rate of 6% per year. It has both common stock and non-participating preferred stock outstanding. The cost of preferred stock (kps) is 8%. The par value of the preferred stock is $120, and the stock has a stated dividend of 10% of par. What is the market value of the preferred s
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
On December 31, 1998, Mistery Inc. had 450,000 shares of no-par common stock issued and outstanding. All shares were sold for $7.50. On June 30, 1999, the firm issued an additional 135,000 shares for $7.00 per share. The 1999 income was $319,200. On September 1, 2000, a 15% stock dividend was issued to all common shareholders. O
Neil Inc. uses the weighted average method in its process costing system. The following data concern the operations of the company's first processing department for a recent month. Work in process, beginning: Units in process 400 Stage of completion with respect to materials 90% Stage of
In the lamination department, varnish is added when the goods are 60% complete as to overhead. The units that are spoiled during processing are found upon inspection at the end of production. Spoilage is considered discrete. Production Data For March Beg.Inv.(80% complete as to labor, 70% complete as to overhead):
1) The following data is available for the Fabricating and finishing departments of Williams manufacturing company for the month ending January 2001. (see attached file) Prepare a cost of production report for each department under the weighted average and FIFO methods
1. Billick Brothers is estimating its WACC. The company has collected the following information: ? Its capital structure consists of 40 percent debt and 60 percent common equity. ? The company has 20-year bonds outstanding with a 9 percent annual coupon that are trading at par. ? The company's tax rate is 40 percent. ? Th
Given the following information for Acme Corporation, find the weighted average cost of capital. Assume the company's tax rate is 35%. Debt: 10,000 9 percent coupon bonds outstanding, $1,000 par value, 12 years to maturity, selling for 103 percent of par; the bonds make annual payments. Common stock: 100,000 shares outs
Given the following information for Janicek Power Co., find the WACC. Assume the company's tax rate is 35%. Debt: 5,000 8 % coupon bonds outstanding, $1000 par value, 10 years to maturity, selling for 96% of par; the bonds make semiannual payments. Common stock: 60,000 shares outstanding, selling for $75 per share; beta