LCG Distribution Company is in the process of setting its target capital structure. The CFO believes that the optimal debt ratio is somewhere between 20% and 50%, and her staff has compiled the following projections for EPS and the stock price at various debt levels. What is LCG’s optimal capital structure?
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LCG Distribution Company is in the process of setting its target capital structure. The CFO believes that the optimal debt ratio is somewhere
between 20% and 50%, and her staff has compiled the following projections for EPS and the stock price at various debt levels. What is LCG’s optimal capital structure?
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- Terrell Trucking Company is in the process of setting its target capital structure. The CFO believes that the optimal debt-to- capital ratio is somewhere between 20 % and 50%, and her staff has compiled the following projections for EPS and the stock price at various debt levels: Debt / Capital Ratio Projected EPS Projected Stock Price 20 % $ 3.15 $32.25 30 3.40 37.75 40 3.70 35.50 50 3.55 34.00 Assuming that the firm uses only debt and common equity, what is Terrell's optimal capital structure ? Choose from the options provided above. Round your answers to two decimal places. % debt % equity At what debt to capital ratio is the company's WACC minimized? Choose from the options provided above. Round your answer to two decimal places. %Terrell Trucking Company is in the process of setting its target capital structure. The CFO believes that the optimal debt-to-capital ratio is somewhere between 20% and 50%, and her staff has compiled the following projections for EPS and the stock price at various debt levels: Debt/Capital Ratio Projected EPS Projected Stock Price 20% $3.20 $33.00 30 3.50 36.00 40 3.90 37.50 50 3.60 32.50 Assuming that the firm uses only debt and common equity, what is Terrell's optimal capital structure? Choose from the options provided above. Round your answers to two decimal places. % debt % equity At what debt-to-capital ratio is the company's WACC minimized? Choose from the options provided above. Round your answer to two decimal places. %.Scanlon Inc.'s CFO hired you as a consultant to help her estimate the cost of capital. You have been provided with the following data: rRF = 4.10%; RPM = 5.25%; and b = 0.70. Based on the CAPM approach, what is the cost of equity?
- LCG Distribution Company is in the process of setting its target capital structure. The CFO believes that the optimal debt ratio is somewherebetween 20% and 50%, and her staff has compiled the following projections for EPS and the stock price at various debt levels:Debt Ratio Projected EPS Projected Stock Price20% P3.20 P35.0030% 3.45 36.5040% 3.75 36.2550% 3.50 35.50Assuming that the firm uses only debt and common equity,1. What is LCG’s optimal capital structure? ___________ 2. What debt ratio is the company’s WACC minimized? ___________Terrell Trucking Company is in the process of setting its target capital structure. The CFO believes that the optimal debt-to-capital ratio is somewhere between 20% and 50%, and her staff has compiled the following projections for EPS and the stock price at various debt levels: Projected EPS Projected Stock Price $32.25 $3.10 3.45 37.25 3.80 36.25 3.60 33.50 Assuming that the firm uses only debt and common equity, what is Terrell's optimal capital structure? Choose from the options provided above. Round your answers to two decimal places. % debt % equity At what debt-to-capital ratio is the company's WACC minimized? Choose from the options provided above. Round your answer to two decimal places. Debt/Capital Ratio 20% 30 40 50 %Terrell Trucking Company is in the process of setting its target capital structure. The CFO believes that the optimal debt-to-capital ratio is somewhere between 20% and 50%, and her staff has compiled the following projections for EPS and the stock price at various debt levels: Debt/Capital Ratio Projected EPS Projected Stock Price 20% $3.10 $34.24 30% 3.55 36.00 40% 3.7 35.50 50% 3.55 34.00 Assuming that the firm uses only debt and common equity, what is Terrell's optimal capital structure? At what debt-to-capital ratio is the company's WACC minimized?
- Terrell Trucking Company is in the process of setting its target capital structure. The CFO believes that the optimal debt-to-capital ratio is somewhere between 20% and 50%, and her staff has compiled the following projections for EPS and the stock price at various debt levels: Projected EPS Projected Stock Price $3.10 $32.75 3.55 36.25 3.85 35.75 3.60 33.00 Assuming that the firm uses only debt and common equity, what is Terrell's optimal capital structure? Choose from the options provided above. Round your answers to two decimal places. Debt/Capital Ratio 20% 30 40 50 % debt % equity At what debt-to-capital ratio is the company's WACC minimized? Choose from the options provided above. Round your answer to % wo decimal places.EBOOK Terrell Trucking Company is in the process of setting its target capital structure. The CFO believes that the optimal debt-to-capital ratio is somewhere between 20% and 50%, and her staff has compiled the following projections for EPS and the stock price at various debt levels: Projected EPS Debt/Capital Ratio 20% 30 40 50 Projected Stock Price $3.30 $32.00 3.55 38.00 3.70 35.50 3.55 34.00 Assuming that the firm uses only debt and common equity, what is Terrell's optimal capital structure? Choose from the options provided above. Round your answers to two decimal places. % debt % equity At what debt-to-capital ratio is the company's WACC minimized? Choose from the options provided above. Round your answer to two decimal places.Orange Company was contemplating two (2) capital structure choices. The CFO should choose the optimal capital structure that the company must implement; this decision should maximize the stock price. To do so, the CFO must first perform calculations using data obtained from the company: Plan Alpha 20% debt & 80% equity Wd=20%, Wc= 80% Cost of debt (rd)= 12% Tax rate= 30% bL=1.2 Risk Premium (RP)=4% Risk-free rate (rf)= 6% rs=? WACC=? Plan Omega 30% debt & 70% equity Wd=30%, Wc= 70% Cost of debt(rd)= 10% Tax rate= 30% bL=1.5 Risk Premium (RP)=5% Risk-free rate (rf)= 8% rs=? WACC=? *Hint: Compute for the rs first before computing the WACC.
- Aaron Athletics is trying to determine its optimal capital structure. The company’s capital structure consists of debt and common equity. In order to estimate the cost of capital at various debt levels the company has constructed the following table: Percent financed with debt (wD) Percent financed with equity (ws) Before tax cost of debt 0.10 0.90 7.0% 0.20 0.80 7.2% 0.30 0.70 8.0% 0.40 0.60 8.8% 0.50 0.50 9.6% The company uses the CAPM to estimate its cost of equity, rS . The risk-free rate is 4% and the market risk premium is 5%. Aaron estimates that if it had no debt its beta would be 1.0. (It’s unlevered beta equals 1.0). The company’s tax rate is 40%. On the basis of this information, what is the company’s optimal capital structure, and what is the WACC at that capital structure? (Show your calculations at each debt level).You have been hired as a consultant by Capital Pricing Company's CFO, who wants you to help her estimate the cost of capital. You have been provided with the following data: risk free rate = 5%; market risk premium = 9.3%; and beta = 1.12. Based on the CAPM approach, what is the cost of common stock from reinvested earnings?Kellogg’s CFO is in the process of determining the firm’s WACC and needs to figure out the weights of the various types of capital sources. Accordingly, she starts by collecting information from the balance sheet and the capital markets, and makes up the table shown below: Component Balance Sheet Value Number Outstanding Current Market Price Market Value Debt $150,000,000 150,000 $1,075 Preferred Stock $ 45,000,000 1,500,000 $40 Common Stock $180,000,000 4,500,000 $45.57 Corporate tax rate = 30% is Tc Before tax cost of debt = 7.6% Rd Cost of Equity = 11.36% Re Based upon the above information, calculate the firm’s weighted average cost of capital.