Dani Corporation has 9 million shares of common stock outstanding. The current share price is $75, and the book value per share is $6. The company also has two bond issues outstanding. The first bond issue has a face value of $100 million, has a coupon rate of 4 percent, and sells for 96 percent of par. The second issue has a face value of $85 million, has a coupon rate of 3 percent, and sells for 108 percent of par. The first issue matures in 24 years, the second in 7 years. Suppose the most recent dividend was $4.55 and the dividend growth rate is 4.9 percent. Assume that the overall cost of debt is the weighted average of that implied by the two outstanding debt issues. Both bonds make semiannual payments. The tax rate is 21 percent. What is the company's WACC?
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- Q No.3 Find the WACC of Naveed Computers. The total book value of the firm’s equity is $12 million; book value per share is $22. The stocks sell for a price of $32 per share, and the cost of equity is 16 percent. The firm’s bonds have a face value of $6 million and sell at a price of 110 percent of face value. The yield to maturity on the bond is 9 percent, and the firm’s tax rate is 40 percent.Problem 13-9 Calculating the WACC Dani Corporation has 7 million shares of common stock outstanding. The current share price is $79, and the book value per share is $10. The company also has two bond issues outstanding. The first bond issue has a face value of $120 million, a coupon rate of 4 percent, and sells for 92 percent of par. The second issue has a face value of $105 million, a coupon rate of 3 percent, and sells for 104 percent of par. The first issue matures in 22 years, the second in 7 years. Suppose the most recent dividend was $4.75 and the dividend growth rate is 5.2 percent. Assume that the overall cost of debt is the weighted average of that implied by the two outstanding debt issues. The tax rate is 25 percent. What is the company's WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) WACC %Problem 14-12 Book Value versus Market Value [LO3] Dani Corporation has 6 million shares of common stock outstanding. The current share price is $66, and the book value per share is $5. The company also has two bond issues outstanding. The first bond issue has a face value of $55 million, a coupon rate of 6 percent, and sells for 91 percent of par. The second issue has a face value of $40 million, a coupon rate of 5 percent, and sells for 103 percent of par. The first issue matures in 21 years, the second in 6 years. Both bonds make semiannual coupon payments. a. What are the company's capital structure weights on a book value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.) b. What are the company's capital structure weights on a market value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.) a. Equity/Value a. Debt/Value b. Equity/Value b. Debt/Value c. Which are more…
- Problem 13-5 Calculating WACC (LO1) The total book value of WTC’s equity is $7 million, and book value per share is $14. The stock has a market-to-book ratio of 1.5, and the cost of equity is 12%. The firm’s bonds have a face value of $4 million and sell at a price of 110% of face value. The yield to maturity on the bonds is 9%, and the firm’s tax rate is 21%. What is the company’s WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)Question TwoThe equity beta of Fence Co is 0·9 and the company has issued 10 million ordinary shares. The market value of each ordinary share is K7·50. The company is also financed by 7% bonds with a nominal value of K100 per bond, which will be redeemed in seven years’ time at nominal value. The bonds have a total nominal value of K14 million. Interest on the bonds has just been paid and the current market value of each bond is K107·14.Fence Co plans to invest in a project which is different to its existing business operations and has identified a company in the same business area as the project, Hex Co. The equity beta of Hex Co is 1·2 and the company has an equity market value of K54 million. The market value of the debt of Hex Co is K12 million. The risk-free rate of return is 4% per year and the average return on the stock market is 11% per year. Both companies pay corporation tax at a rate of 20% per year.Required:(a) Calculate the current weighted average cost of capital of…Question 8 One company has the following debt and equity: Common stock: 500,000 shares outstanding, selling for $30 per share; beta is 2.5. Debt: 10,000 bonds, selling for 105 percent of par. The bonds have a $1,000 par value each and the YTM is 8%. Preferred stock: 15,000 shares outstanding, selling for $250 per share. Annual dividend is $30 per share. The market risk premium is 4%, and the risk-free rate is 1.5%. tax rate is 21%. a) What are cost of equity, cost of debt, and cost of preferred stock? b) What is the capital structure weights of the company? (hint: the weight of each financing) c) What is the cost of capital of the company?
- QUESTION 3 CER Corporation has 8.75 million shares of common stock outstanding, 215,000 sharesof RM6 annual dividend preferred stock outstanding, and 105,000 of 7.5% semi-annualbond outstanding. The common stock is currently sells for RM34 per share and has abeta of 1.25, the preferred stock currently sells for RM91 per share, and the bonds have15 years to maturity and sell for 93% of par. The market risk premium is 8.5%, T-bills areyielding 5%, and corporate tax rate is 35%. Calculate the following:(a) Firm’s market value capital structure.(b) Cost of equity.(c) Cost of preferred stock Thank youQUESTION FOUR A. Explain why a firm might consider a stock split for its shares. B. Z Corporation has 1,000 shares of K20 par value common stock outstanding. The company is considering a 4 for 1 stock split. How will this affect the shareholders' equity accounts? C. XY Ltd has bonds outstanding with 7 years left before maturity. The bonds are currently selling for K800 per K1,000 face value bond. The interest is paid annually at a rate of 12 percent. The firm's tax rate is 40 percent. Calculate the after-tax cost of debt. D. The Yufi Mining Corporative is set to open a gold mine in Mansa. According to the evaluations made this far, the mine will cost K900,000 to open and will have an economic life of 11 years. It will generate a cash inflow of K175,000 at the end of the first year, and the cash inflows are projected to grow at 8% per year for the next 10 years. It is projected that the mine will be abandoned in the 11th year. Abandonment costs are expected to be K125,000 at the end of…Problem 12-11 Finding the WACC You are given the following information for Tara Ita Power Co. Assume the company’s tax rate is 22 percent. Debt: 10,000 7.1 percent coupon bonds outstanding, $1,000 par value, 25 years to maturity, selling for 107 percent of par; the bonds make semiannual payments. Common stock: 430,000 shares outstanding, selling for $61 per share; the beta is 1.04. Market: 10 percent market risk premium and 5.1 percent risk-free rate. What is the company's WACC?
- Problem 13-11 Finding the WACC You are given the following information for Huntington Power Company. Assume the company's tax rate is 25 percent. Debt: 34,000 5.3 percent coupon bonds outstanding, $2,000 par value, 26 years to maturity, selling for 106 percent of par; the bonds make semiannual payments. Common stock: 490,000 shares outstanding, selling for $80 per share; the beta is 1.14. Market: 6 percent market risk premium and 4.5 percent risk-free rate. What is the company's WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) WACC %Problem 13-7 WACC (LO1) Examine the following book-value balance sheet for University Products Inc. The preferred stock currently sells for $15 per share and pays a dividend of $3 a share. The common stock sells for $20 per share and has a beta of 0.7. There are 2 million common shares outstanding. The market risk premium is 12%, the risk-free rate is 8%, and the firm's tax rate is 21%. Assets Cash and short-term securities Accounts receivable Inventories Plant and equipment Total $2.0 3.0 7.0 25.0 $37.0 BOOK-VALUE BALANCE SHEET (Figures in $ millions) Liabilities and Net Worth Bonds, coupon = 5%, paid annually (maturity = 10 years, current yield to maturity = 7%) Preferred stock (par value $20 per share) Common stock (par value $0.10) Additional paid-in stockholders' equity Retained earnings Total $10.0 3.0 0.2 11.8 12.0 $37.0 a. What is the market debt-to-value ratio of the firm? b. What is University's WACC? (For all the requirements, do not round intermediate calculations. Enter…Question 5/2 Treasure Island Ltd. currently has the following capital structure: Debt: $3,500,000 par value of outstanding non-callable bond that pays annually 10% coupon rate with an annual before-tax yield to maturity of 8.5%. The bond issue has face value of $1,000/bond and will mature in 20 years. Ordinary shares: 70,000 outstanding ordinary shares. The firm plans to pay a $4.50 dividend per share in the next financial year. The firm is maintaining 5% annual growth rate in dividend, which is expected to continue indefinitely. Preferred shares: 45 000 outstanding preferred shares with face value of $100, paying fixed dividend rate of 13%. Company tax rate is 30%. Required: Complete the following tasks: A) Calculate the current market value (rounded off to the nearest whole number) and capital structure of the firm (rounded off to two decimal places). Identify the total…