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Weighted Average Cost of Capital (WACC)

Nantucket Nugget Capital Structure: Calculate New WACC

The Nantucket Nugget is unlevered and is valued at $640,000. Nantucket is currently deciding whether including debt in their capital structure would increase their value. The current cost of equity is 12%. Under consideration is issuing $300,000 in new debt (perpetuity) with an 8% interest rate. Nantucket would repurchase $300,0

Calculate WACC for 2008 and 2009 for Google

See attached files. Google is the target company using a two-year financial analysis, need to calculate the WACC for 2008 and 2009. Attached are the financial reports for 2008 and 2009 and relevant links. Investor relations Quarterly Earnings http://

Calculating WACC, Capital Structure

Jingle Bell is 60% debt-financed and the expected return on its debt is 6%. Its equity beta is 2. Risk-free rate of return is 4% and market risk premium is 4%. Assume Jingle Bell operates in a MM world with no taxes. a) What is Jingle Bell's WACC? b) An investor has invested all her savings (â?¬10,000) in bell product

1. Compute Maple Leaf's weighted-average cost of capital (WACC). 2. Compute the economic value added (or EVA) for each of the company's three divisions. 3. What conclusions can you draw from the EVA analysis?

Maple Leaf Industries, headquartered in Toronto, is a multiproduct company with three divisions: Pacific Division, Plains Division, and Atlantic Division. The company has two sources of long-term capital: debt and equity. The interest rate on Maple Leafâ??s $400 million debt is 9 percent, and the companyâ??s tax rate is 30

What is the WACC for Richardson Electronics based on market-value weights?

Richardson Electronics has issued long-term bonds with a total market value of $50 million, and these bonds currently earn an expected return (rd) of 9 percent. Additionally, Richardson has 4 million shares of common stock outstanding, with each share trading for $10 (P0 = $10). At this price per share the stocks offer an

Rondo's cost of Capital after the acquisition of Poly Pipe

Recall the determined the cost of capital for Rondo. Rondo's cost of capital is the appropriate discount rate for evaluating company investment projects and we applied it to evaluating Option 1. Now I introduce a twist. When evaluating an acquisition, the appropriate discount rate is not the acquirer's cost of capital but rather

DLR Company: APV or WACC to calculate market value of equity

See attached files. DLR Company has just announced its results for the end of fiscal year. The following information is from its financial statements (all numbers in $ 000): Income Statement Sales 20,000.00 Cost of goods sold (14,000.00) Gross profi t 6,0

Finance: Multiple choice questions about stock options

1. Other things held constant, the value of an option depends on the stock's price, the risk-free rate, and the a.Strike price. b.Variability of the stock price. c.Option's time to maturity. d.All of the above. e.None of the above. 2. Which of the following statements is CORRECT? a.Put

Pricing Project: Weighted Average Price

Attached is the spreadsheet we are supposed to complete. However, I ran into a snag. My pretend company sells its beer in six-packs and kegs. Since there is a mixture, I am unsure how to calculate the break-even for the sales and the volume. Please see ** ATTACHED ** file(s) for complete details!!

Akinrimisi Corporation: Compute weighted average number of shares

On January 1, 2009, Akinrimisi Corporation had 1,000,000 shares of common stock outstanding. On March 1, the corporation issued 150,000 new shares to raise additional capital. On July 1, the corporation declared and issued a 2-for-1 stock split. On October 1, the corporation purchased on the market 600,000 of its own outstanding

Rollins CorporATION: WACC, Cost of debt, cost of common and preferred stock

Rollins Corporation is estimating its WACC. Its current and target capital structure is 20 percent debt, 20 percent preferred stock, and 60 percent common equity. Its bonds have a 12 percent coupon rate, paid semiannually, a current maturity of 20 years, and sell for $950. The firmâ??s preferred stock is trading at $100. The

Xhat Inc has 12,000 bonds outstanding that have a 6% coupon rate.

Can you please take a look at this problem? Xhat Inc has 12,000 bonds outstanding that have a 6% coupon rate. The bonds are selling at 98% of face value, pay interest semi-annually, and mature in 28 years. There are 400,000 shares of 9% $100 preferred stock outstanding with a current market price of $83 a share. In addition,

Cost of Capital

1) Company X is an all-equity firm (i.e. it has no debt financing) with a beta of 1.15. If the risk-free rate is 5% and the market risk premium is 9% (the expected return in the market is 14%), determine the cost of equity capital for Company X. 2) Nexel Online has a beta of 1.4 and has a debt-to-equity ratio of 0.75. (NOTE:

Weighted average cost of capital (WACC), divisional WACC

ABC company currently has the following capital structure: 30% debt and 70% equity based on market values. Company's equity beta based on its current level of debt financing is 1.20 and its debt beta is 0.30. Risk free rate of interest is currently 2.5% on long-term government bonds. The company's pre-tax cost of debt is 5%. Th

Value of Project

5. Suppose Lucent Technologies has an equity cost of capital of 10%, marketd capitalization of $10.8 billion, and an enterprise value of $14.4 billion. Suppose Lucent's debt cost of capital is 6.1% and its marginal tax rate is 35%. a. What is Lucent's WACC? b. If Lucent maintains a constant debt-equity ratio, what is the

Calculation of WACC

Summary of the balance sheet of XYZ below Balance sheet of XYZ as at 31 December 2009 ('000) Cash R10 Account payable R10 Accounts receivable 20 Acruals 10 Inventories 20

Accounting, tax and legal factors affect an M&A strategy

How does the following effect mergers and acquisitions o Accounting: Revenue enhancement, cost reduction, and risk management o Taxes: Shields, synergies, and the weighted average cost of capital o Legal: Corporate organization and ownership, litigation risk, and legal compliance Select at least two effects fro

Johnson Industries Cost of Capital

Johnson Industries provides the following information on the company's common stocks, preferred stocks and bonds: The company can issue a bond at yield to maturity of 7.85%. The company pays a dividend on preferred stock of $4.76. The company just issued a dividend of $5.00 on its common stock. They anticipate that dividen

Corporate Finance (Weighted Average Cost of Capital)

You have been asked to calculate the weighted average cost of capital for Future Flow Enterprises (FFE) and have been provided with the following information to complete the task.  The company's effective tax rate is 40%  FFE currently has a bond issue outstanding, with a market price of $1,136.28 per $1,000

WACC Estimation

Assume that you were recently hired by a company (TII), as a financial analyst and that your boss, the treasurer, has asked you to estimate the company's Weighted Average Cost of Capital (WACC) under the assumption that NO new equity will be issued. The cost of capital should be appropriate for use in evaluating projects that a

What is the component cost of debt for use in the WACC calculation?

14. To help finance a major expansion, Castro Chemical Company sold a noncallable bond several years ago that now has 20 years to maturity. This bond has a 9.25% annual coupon, paid semiannually, sells at a price of $850, and has a par value of $1,000. If the firm's tax rate is 40%, what is the component cost of debt for use in

By how much did the change in the WACC affect the project's forecasted NPV?

10. Lasik Vision Inc. recently analyzed the project whose cash flows are shown below. However, before Lasik decided to accept or reject the project, the Federal Reserve took actions that changed interest rates and therefore the firm's WACC. The Fed's action did not affect the forecasted cash flows. By how much did the change in