please answer with all complete computation 4. Feast Foods is interested in calculating its weighted average cost of capital. Thecompany's CFO has collected the following information:The target capital structure consists of 40% debt and 60% common stockThe company has a 20-year noncallable bonds with a par value of P1,000, a 9%annual coupon, and is selling now at 92-1/4.Equity flotation costs are 2%The company's common stock has a beta of 0.80The risk-free rate is 5%; and market risk premium is 4%The company's tax rate is 40%

To calculate the WACC, we need to first determine the cost of debt, the cost of equity, and the…

Answered: 4. Feast Foods is interested in…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter12: The Cost Of Capital

Section: Chapter Questions

Problem 17P

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Patilya Pata Food is interested in calculating its weighted average cost of capital. The company's CFO has collected the following information: ● The target capital structure consists of 40% debt and 60% common stock • The company has a 20-year noncallable bonds with a par value of P1,000, a 9% annual coupon, and is selling now at 92-1/4. Equity flotation costs are 2% • The company's common stock has a beta of 0.80 •The risk-free rate is 5%; and market risk premium is 4% The company's tax rate is 40% Show complete solution ●
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A firm has determined its optimal capital structure which is composed of the following sources. Preferred Stock:The firm has determined it can issue preferred stock at RM75 per share par value. The stock will pay a RM10 annual dividend. The cost of issuing and selling the stock is RM3 per share. Common Stock:The firm’s common stock is currently selling for RM18 per share. The dividend expected to be paid at the end of the coming year is RM1.74. Its dividend payments have been growing at a constant rate of 3% for the last four years. It is expected that to sell, a new common stock issue must be underpriced, with floatation costs of RM1 per share. Based on the above information, what is the firm’s cost of preferred stock and cost of a new issue of common stock? Which of the two sources offers a lower cost? Show your workings.
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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.

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