First Data Co. has 20 million shares of common stock outstanding that are currently trading at $25 per share. The firm’s debt is publicly trading at 95% of its $180 million face value. The yield-to-maturity of debt is 10% and the cost of equity is 20%. What is the weighted average cost of capital for the firm assuming at 40% corporate tax rate? Group of answer choices .1354 .1478 .1599 .1643 .1811

First Data Co. has 20 million shares of common stock outstanding that are currently trading at $25 per share. The firm’s debt is publicly trading at 95% of its $180 million face value. The yield-to-maturity of debt is 10% and the cost of equity is 20%. What is the weighted average cost of capital for the firm assuming at 40% corporate tax rate? Group of answer choices .1354 .1478 .1599 .1643 .1811

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter14: Distributions To Shareholders: Dividends And Repurchases

Section: Chapter Questions

Problem 12P: Bayani Bakerys most recent FCF was 48 million; the FCF is expected to grow at a constant rate of 6%....

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Bayani Bakerys most recent FCF was 48 million; the FCF is expected to grow at a constant rate of 6%. The firms WACC is 12%, and it has 15 million shares of common stock outstanding. The firm has 30 million in short-term investments, which it plans to liquidate and distribute to common shareholders via a stock repurchase; the firm has no other nonoperating assets. It has 368 million in debt and 60 million in preferred stock. a. What is the value of operations? b. Immediately prior to the repurchase, what is the intrinsic value of equity? c. Immediately prior to the repurchase, what is the intrinsic stock price? d. How many shares will be repurchased? How many shares will remain after the repurchase? e. Immediately after the repurchase, what is the intrinsic value of equity? The intrinsic stock price?
← Unida Systems has 35 million shares outstanding trading for $12 per share. In addition, Unida has $95 million in outstanding debt. Suppose Unida's equity cost of capital is 16%, its debt cost of capital is 8%, and the corporate tax rate is 38%. a. What is Unida's unlevered cost of capital? b. What is Unida's after-tax debt cost of capital? c. What is Unida's weighted average cost of capital? a. What is Unida's unlevered cost of capital? Unida's unlevered cost of capital is%. (Round to two decimal places.)
(Individual or component costs of capital) Compute the cost of capital for the firm for the following a. Currently bonds with a similar credit rating and maturity as the firm's outstanding debt are selling to yield 8.84 percent while the borrowing firm's corporate tax rate is 34 percent. b. Common stock for a firm that paid a $1.02 dividend last year. The dividends are expected to grow at a rate of 4 1 percent per year into the foreseeable future. The price of this stock is now $25 56, c. A bond that has a $1,000 par value and a coupon interest rate of 11.2 percent with interest paid semiannually. A new issue would sell for $1,151 per bond and mature in 20 years. The firm's tax rate is 34 percent d. A preferred stock paying a dividend of 7.7 percent on a $107 par value. If a new issue is offered, the shares would sell for $84 71 per share a. The after-tax cost of debt debit for the firm is (Round to two decimal places)
Mitsu Corporation has 100,000 shares of common stock outstanding. The stock currently sells for $50 per share and has a beta of 1.8. The firm has $4 million debt outstanding. The cost of debt before tax is 6.5%. The market risk premium is 7%. T- bills are yielding 4%. Tax rate is 35%. What is the weighted average cost of capital (WACC) of the firm? A) 9.07% O B) 11.10% C) 9.93% D) 11.50% E) 10.36%
James Madison Ltd. expects a net income of 200,000. The company has 5% of 1,000,000 bonds payable. The equity capitalization rate of the company is 20%. (a) Calculate the value of the firm and average cost of capital according to the net income approach (ignoring income tax).
Hook Industrie's capital structure consists solely of debt and common equity. It can issue debt at 10% and its common stock currently pays a 52.50 dividend per share. The stock's price is currently $27.25, its dividend is expected to grow at a constabt rate of 5% per year, and its WACC is 12.15% What percentage of the company's capital structure consists of debt? The company is in the 30% tax bracket. Skip question Start Solving Exit ↑ O G
Calculate the weighted average cost of capital (WACC) of company ABC Inc., if: 1. The company's current capital structure consists of 35% from a long-term corporate bond, 30% from new common stock to be issued in the coming months, 20% from retained earnings and the rest is financed by a bank loan. The corporate tax rate is 35%. II. The company's cost of debt from the bond issuance is 9% and from the bank loan is 8%. III. The current stock price of common stock is €10, the current dividend (D) is €0.80 per share and dividends are expected to grow by 2% per year. New common stock flotation costs stand at 3% of the current stock price. OA Around 11% OB. Around 9% OC. Around 8% OD. Around 7% OE. None of the given answers is correct
Calculate the weighted average cost of capital (WACC) of company ABC Inc., if: I. The company’s current capital structure consists of 35% from a long-term corporate bond, 30% from new common stock to be issued in the coming months, 20% from retained earnings and the rest is financed by a bank loan. The corporate tax rate is 35%. II. The company’s cost of debt from the bond issuance is 9% and from the bank loan is 8%. III. The current stock price of common stock is €10, the current dividend (Do) is €0.80 per share and dividends are expected to grow by 2% per year. New common stock flotation costs stand at 3% of the current stock price.
Unida Systems has 35 million shares outstanding trading for $11 per share. In addition, Unida has $87 million in outstanding debt. Suppose Unida's equity cost of capital is 14%, its debt cost of capital is 7%, and the corporate tax rate is 40%. a. What is Unida's unlevered cost of capital? b. What is Unida's after-tax debt cost of capital? c. What is Unida's weighted average cost of capital? a. What is Unida's unlevered cost of capital? Unida's unlevered cost of capital is 12.7%. (Round to one decimal place.) b. What is Unida's after-tax debt cost of capital? Unida's after-tax debt cost of capital is 4.2%. (Round to one decimal place.) c. What is Unida's weighted average cost of capital? Unida's weighted average cost of capital is %. (Round to one decimal place.)
a) Table below shows the simplified balance sheet information for Jess Elton Enterprise. The debt has just been refinanced at an interest rate of 6% (short term) and 8% (long term). The expected rate of return on the company's shares is 15%. There are 7.46 million shares outstanding, and the shares are trading at $46. The tax rate is 35%. Calculate this company's weighted-average cost of capital (WACC) based on the market weighted scheme. 1,500 Short-term debt 75,600 Cash and marketable securities Accounts receivable Inventory Current assets Property, plant, and equipment Other assets Total 120,000 Accounts payable 125,000 Current liabilities 246,500 302,000 Long-term debt 89,000 Shareholders' equity 637,500 Total 62,000 137,600 208,600 637,500 246,300 b) Discuss the different funding strategies a company may follow in order to finance its cumulative working capital requirements.
Here is Icknield’s market-value balance sheet (figures in $ millions): Net working capital $550 Debt $800 long term assets $2,150 Equity $1,900 value of firm $2,700 $2,700 The debt is yielding 7%, and the cost of equity is 14%. The tax rate is 21%. Investors expect this level of debt to be permanent. a. What is Icknield’s WACC? b. How would the market-value balance sheet change if Icknield retired all its debt?
1. The Dumaguete Co. has an equity cost of capital of 17%. The debt to equity ratio is 1.5 and a cost of debt is 11%. What is the weighted average cost of capital of the firm? (Assume a tax rate of 33%) a. 15.52% b. 3.06% c. 13.40% d. 16.97% 2. Metrobank’s stock is currently trading at P25 per share. The stock’s dividend is projected to increase at a constant rate of 7 percent per year. The required rate of return on the stock is 10 percent. what is the stock’s dividend yield today? a. cannot be determined from the information provided b. 3% c. 10% d. 7% 3. What is the expected rate of return on a bond that pays a coupon rate of 9%, has a par value of P1,000, matures in five years, and is currently selling for P714? Round your answer to the nearest whole percent and assume annual coupon payments. a. 13% b. 18% c. 16% d. 17%