Wishing Well's WACC
Not what you're looking for?
Table 20.3 shows a book balance sheet for the Wishing Well Motel chain. The company's long-term debt is secured by its real estate assets, but it also uses short-term bank financing. It pays 10% interest on the bank debt and 9% interest on the secured debt. Wishing Well has 10 million shares of stock outstanding, trading at $90 per share. The expected return on Wishing Well's common stock is 18%.
Calculate Wishing Well's WACC. Assume that the book and market values of Wishing Well's debt are the same. The marginal tax rate is 35%.
** See attachment for Table 20.3. **
Purchase this Solution
Solution Summary
WACC for Wishing Well is calculated along with detailed step by step instructions.
Solution Preview
Total Liabilities (Current Liabilities + Long Term Liabilities) = $ 400m + $ 1,800 m = $ 2,200 m
Short Term Debt ($ 280m) is more than 10% of the total liabilities ($ 220m).
Also, current liabilities ($ ...
Purchase this Solution
Free BrainMass Quizzes
Academic Reading and Writing: Critical Thinking
Importance of Critical Thinking
Understanding the Accounting Equation
These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.
Accounting: Statement of Cash flows
This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.
Managing the Older Worker
This quiz will let you know some of the basics of dealing with older workers. This is increasingly important for managers and human resource workers as many countries are facing an increase in older people in the workforce
Employee Orientation
Test your knowledge of employee orientation with this fun and informative quiz. This quiz is meant for beginner and advanced students as well as professionals already working in the HR field.