Calculation of individual costs and WACC BlackRock, Inc. (BLK) has a capital structure that consists of common stock equity and debt. The market capitalization of its equity is $76.644 billionand its debt has a market value of $6.797 billion.a. Calculate the market value weights for BLK's capital structure.b. Calculate BLK's cost of equity using a beta of 1.26, a risk-free rate of 0.78%, and a market risk premium of 6.70%.c. Calculate BLK's cost of debt using a bond price of $1,067.77, semi-annual coupon payment of $28.75, and 5 years to maturity.d. Calculate BLK's current WACC using a 21% corporate tax rate.a. The market value weight of long-term debt in BLK's capital structure is %. (Round to two decimal places.)

Part 2: Explanation:a. To calculate the market value weights, divide the market capitalization of…

Answered: Calculation of individual costs and…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Calculation of individual costs and WACC Dillon Labs has asked its financial manager to measure the cost of each specific type of capital as well as the weighted average cost of capital. The weighted average cost is to be measured by using the following weights: 50% long-term debt, 15% preferred stock, and 35% common stock equity (retained earnings, new common stock, or both). The firm's tax rate is 21%. Debt The firm can sell for $1030 a 17-year, $1,000-par-value bond paying annual interest at a 9.00% coupon rate. A flotation cost of 3% of the par value is required. Preferred stock 10.00% (annual dividend) preferred stock having a par value of $100 can be sold for $94. An additional fee of $6 per share must be paid to the underwriters. Common stock The firm's common stock is currently selling for $50 per share. The stock has paid a dividend that has gradually increased for many years, rising from $2.50 ten years ago to the $3.70 dividend payment, Do, that the company just recently…
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The calculation of WACC involves calculating the weighted average of the required rates of return on debt, preferred stock, and common equity, where the weights equal the percentage of each type of financing in the firm' s overall capital structure. is the symbol that represents the before-tax cost of debt in the weighted average cost of capital (WACC) equation. Mitchell Co. has $1.1 million of debt, $2 million of preferred stock, and $3.3 million of common equity. What would be its weight on preferred stock? 0.28 0.25 0.17 0.31
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