Please see attached document for instructions. Can you help me with this assignment? The financial manager of a firm determines the following schedules of cost of debt and cost of equity for various combinations of financing: Debt/Assets After-Tax Cost of Debt Cost of Equity 0% 4% 8% 10 4 8 20 4 8 30 5 8
1. Howard Industries has a target capital structure consisting of 35% debt, 5% preferred stock, and 60% common equity. The-tax YTM on Howard's long term bonds is 9.5% it cost of preferred stock is 8% and its cost of retained earnings is 12.5%. If the firm's 40% what is Howard's WACC if it doesn't have to issue new common stock?
1. Doctors-On-Call, a newly formed medical group, just paid a dividend of $1.50. The company's dividend is expected to grow at a 20% rate for the next 3 years and at a 3% rate thereafter. What is the value of the stock if the appropriate discount rate is 12%? 2. Bill Bailey and Sons pays no dividend at the present time. The
Can you help me with this assignment? CC Cushions Company is a pillow maker that is considering a new capital investment project that requires a $40 million investment today. Next year, the project will generate expected pre-tax cash flows of $2 million, all of which are taxable. The following year, expected cash flows will g
You are considering an investment in a project that requires an initial outlay of $225,000 and will produce after-tax cash flows of $35,000 per year for the next 15 years. Your firm uses 50% debt and 50% equity in its financing. The after-tax cost of debt and equity are 9% and 15%, respectively. a. What is the firm's weighte
A corporation is unlevered and is valued at $640,000. The corporation is currently deciding whether including debt in its capital structure would increase its value. The current cost of equity is 12%. Under consideration is issuing $300,000 in new debt with an 8% interest rate. The corporation would repurchase $300,000 of stock
See attached file for proper format. 1. A company is operating in three areas of the economy (sectors or industries) and the divisional betas are presented below: Beta Value Division A .75 $200,000 Division B 1.35 $300,000 Division C 1.80 $500,000 What is the company's beta? 2. Foe Corporation's has the cap
The Illinois Company manufactures a product that goes through three processing departments. Information relating to activity in the first department during June is given below: Percent completed Units
Auger 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 - 700 % Complete (materials) - 80% % Complete (conversion) - 40% Costs in the Beginning Invent
Because the weighted average given in the equation shown below is always a correct measure of a required return, why do firms not create securities to finance each project and offer them in the capital markets in order to accurately determine the required return for project?
Identify the schedule of cash flows in each year of the project. Calculate the WACC for the project. Calculate the NPV
What would you expect to happen to a firm's stock price as the firm changes its capital structure from zero debt to successively higher levels of debt? Note: in order to get full points, you need to explain what happens at different debt levels and why.
1) Gupta Corporation is undergoing a restructuring, and its free cash flows are expected to vary considerably during the next few years. However, the FCF is expected to be $60 million in year 5, and the FCF growth rate is expected to constant 6.5% beyond that point. The weighted average cost of capital is 12%. What is the horizo
1. At the current time Warren Industries can issue 15-year, $1,000 par-value bonds paying annual interest at a 12% coupon rate. As a result of current interest rates, the bonds can be sold for $1,010 each. Flotation costs of $30 per bond will be incurred in the process (which implies that f = 2.97%, or 0.0297 in decimal form) an
Calculate the WACC company X using the following information: - Debt: $75,000 book value outstanding. The debt is trading at 90% of book value. The yield to maturity is 90%. - Equity: 2,500,000 shares seling at $42 per share. Assume teh expected rate of return on X's stocks is 18%. -Taxes: Company X's marginal tax rate
XYZ has summarized the expected cash flows from a proposed project below. t=0 t=1 t=2 t=3 t=4 total investment outlay $400,000 Operating Cash Flow $120,000 $120,000 $120,000 $12
XYZ is evaluating a project with the following annual net cash flows: 0 year=-$600 1 year=$50 2 year=$100 3 year=$150 4 year=$350 5 year=$100 1) XYZ is a small company with limited resources, its managers are concerned about how capital will be tied up in projects. What is the project's payback period? Assume XYZ's ca
Factors impacting WACC: 1) Firms paying out more earnings as dividends--increase, decrease or uncertain? 2) the firm increase its debt ratio--increase, decrease or uncertain? 3) firm stops risk-adjusting WACC-increase, decrease or uncertain? For each question does the factor increase, decrease WACC or is the factor u
1. Ballack Inc. is a 100% equity-financed company (no debt or preferred stock). Its WACC equals its costs of common equity, their retained earnings will be sufficient to fund its capital budget in the foreseeable future. Their beta of 1.4 the risk-free rate of 6.0% and the market premium is 5.5%. What is their WACC? 2. The
a) xyz Industries has a target capital structure consisting of 30% debt, 10% preferred stock, and 60% common equity. The before-ta YTM on xyz long-term bonds is 9.5%, Its cost of preferred stock is 8%, and its cost of retained earnings is 12.5%. If the firm's tax rate is 40%, what is xyz's WACC if it doesn't have to issue new co
Accounting rate of return, payback, and NPV Busy Beaver Corp. is interested in reviewing its methods of evaluating capital expenditure proposals using the accounting rate of return method. A recent proposal involved a $50,000 investment in a machine that had an estimated useful life of five years and an estimated salvage valu
Carter Corporation uses the weighted-average method in its process costing system. Data concerning the first processing department for the most recent month are listed below: Work in process, beginning: Units in beginning work in process inventory 400 Materials costs $6,900 Conversion costs $2,500 Percent complete for m
What is the weighted average cost of capital if: Tax rate is 34% A company has 150,000 shares of common stock outstanding with a market price of $40 per share An annual dividend of $1.50 was paid last month Dividend growth rate is 5% There are 5,000 bonds outstanding with a $1000 face value per bond bonds have a 10%
Task: Describe how the WACC is currently calculated for PetSmart Inc. Is this the best approach to be using?
Kimbeth Manufacturing uses process costing to control costs in the manufacture of Dust Sensors for the mining industry. The following information pertains to operations for November 2008. (Adapted from June 1995 CMA Exam.) The beginning inventory was 60% complete as to materials and 20% complete
If costs increase from one period to another, will costs that are transferred out of one department under the first in first out (FIFO) method of costing be higher or lower than costs that are transferred out using weighted average method of costing? Why?
1. You borrow 1,000 today from a bank and agree to repay 2,000 at the end of 5 years. What rate of interest is the bank charging you? A. 12% B. 15% C. 18% D. 20% 2. What is the percent value of $1 million to be received at the end of year 50, if the interest rate is 12%, compounded annually? A. 3,460 B. 20,000 C. 34,0
Q1 Lydia wishes to invest $3000 in company A and $7000 in company B. She currently has only $5000 and will borrow the remaining amount to form her two-asset portfolio. If company A has a beta of 1.01 and company B has a beta of 1.37, what is the beta of her portfolio? Q2: RON Ltd has the following capital structure compo
1. Andyco, Inc., has the following balance sheet and an equity market-to-book ratio of 1.8. Assuming the market value of debt equals its book value, what weights should it use for its WACC calculation? Assets Liabilities and Equity $1,100 Debt $500 Equity $600 The weight for this debt is __________% round to two
Bayani Bakery's most recent FCF was $48 million; the FCF is expected to grow at a constant rate of 6%. The firm's WACC is 12% and it has 15 million shares of common stock outstanding. The firm has $30 million in short-term investments, which it plans to liquidate and distribute to common shareholders via a stock repurchase; t