#1 Determine the weighted average cost of capital for a firm given the follow info below:
Equity : $200,000 shares;stock price of $73
Beta of 1.54; risk free rate of 4%; risk premium of 6%
Debt info: Book value of $3 million; interest expense of $278,000; average maturity of 13 years; Pre-tax cost of debt of 6.5%; tax rate of 30%
#2 What is the weighted average cost of capital if stock falls to $65.70 (a 10% decline in price). Leave all other variables as the same before
#3 What is the weighted average cost of capital is stock prices fall for $65.70 and the beta of the firm rises to 1.60. Leave all other variables to same as before.
#4 Suppose the pre-tax costs of debt increases to 8% because of the fall in stock price and rise in systematic risk. Determine the weighted average cost of capital.© BrainMass Inc. brainmass.com June 4, 2020, 1:16 am ad1c9bdddf
The solution calculates the weighted average cost of capital (WACC) under different scenarios.