Given the following information for Huntington Power Co., find the WACC. Assume the company's tax rate is 35 percent. Debt: 5,000 6 percent coupon bonds outstanding, $1,000 par value, 25years to maturity, selling for 105 percent of par; the bonds make semiannual payments. Common Stock: 175,000 shares outstanding, selling for $58 per share; the beta is 1.10. Market: 7 percentmarket risk premium and 5 percent risk - free rate. Solve for WACC in Excel

The necessary rate of return on an organization's investments to meet the demands of its capital…

Answered: Given the following information for…

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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Given the following information of Electric Transport Debt value: $75,000. Debt information: 8.4 percent coupon bonds outstanding. $1,000 par value, 22 years to maturity, selling for $1,030, the bonds make annual payments Equity value: $175,000. Equity information: Beta is 1.21, Market return is 13.1%, and Risk-free rate is 5.1% Assume the company's tax rate is 40%. Calculate the WACC for this firm. 11.80% 12.78% 7.48% 9.19%
You are given the following information for Tara Ita Power Co. Assume the company’s tax rate is 22 percent. Debt: 5,000 6.6 percent coupon bonds outstanding, $1,000 par value, 20 years to maturity, selling for 109 percent of par; the bonds make semiannual payments. Common stock: 380,000 shares outstanding, selling for $56 per share; the beta is 1.12. Market: 5 percent market risk premium and 4.6 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.)
You have the following information about a company:Debt: 5,000 3% bonds with twelve years to maturity. The face value of the bond is $1000. The bonds currently sell for $1190 and the bonds make semi-annual paymentsEquity: 125,000 shares outstanding selling for $65 per share. The beta is 1.35. The last dividend paid was $3.25.Market: There is a 5% market risk premium. The risk free rate is 2%. The corporate tax rate is 25%Given the above information, calculate the firm’s WACC.
Calculate the WACC for Aya Ltd, using the following: 5,000 outstanding, 6% semi-annual coupon bonds, with 25 Debt. years to maturity and selling for 105; 175,000 shares outstanding, selling for $58.00 per share, Common Stock: with a beta of 1.10 Market: equity risk premium of 7% and 5% risk free rate. Tax Rate: 35%
Based on the information below on a company, perform the following to compute the WACC (weighted average cost of capita) Share price $3.00 Number of shares outstanding = 10 million Beta = 2.0 Last traded price of each 5% bond = $1,010 Bonds pay coupons annually and mature in 5 years Face value of bond = $1,000 Number of bonds issued = 20,000 Yield on government long-term bond = 2% Equity risk premium = 4% Singapore corporate tax rate = 20% (a) Determine the cost of equity
Assume that you are on the financial staff of Kumpulan Bossque, and you have collected the following data to estimate the company’s WACC. (1) The firm's noncallable bonds mature in 10 years, have an 8.00% annual coupon and a current yield of 7.62% (2) The company’s tax rate is 27%. (3) The risk-free rate is 6.00%, the market risk premium is 7.00%, and the stock’s beta is 1.20. (4) The target capital structure consists of 45% debt and the balance is common equity. Kumpulan Bossque uses the CAPM to estimate the cost of equity, and it does not expect to issue any new common stock.
Assume that you are on the financial staff of Kumpulan Bossque, and you have collected the following data to estimate the company’s WACC. (1) The firm's noncallable bonds mature in 10 years, have an 8.00% annual coupon and a current yield of 7.62% (2) The company’s tax rate is 27%. (3) The risk-free rate is 6.00%, the market risk premium is 7.00%, and the stock’s beta is 1.20. (4) The target capital structure consists of 45% debt and the balance is common equity. Kumpulan Bossque uses the CAPM to estimate the cost of equity, and it does not expect to issue any new common stock. What is after tax cost of debt?
Consider the following information for Evenflow Power Co., Debt: 2,500 bonds that each year pay 5.5 percent of par value as an annual coupon, have a $1,000 par value, and a yield to maturity of 5.25 percent compounded annually. The bonds have 19 years to maturity and currently sell for 103 percent of par (face) value. 57,500 shares outstanding, selling for $59 per share; the Common stock: beta is 1.17. Preferred stock: 8,500 preferred shares that pay a dividend of 5 percent annually on $100 par value, and currently sell for $106 per share. 6.5 percent market risk premium and 5 percent risk-free Market: rate. Assume the company's tax rate is 32 percent. Note: Face value is sometimes used interchangeably with par value. Preferred shares almost always pay a constant dividend, but the dividend is usually quoted as a percent of par value (just like coupons and bonds). So as an example, a 7% preferred dividend on a $100 par value means the annual dividend payment is $7. Required: Find the…
"Heart Limited has one bond in issue expiring in eight years, paying 0 coupon and has a face value of $1000. It is currently traded at $720, Beta =1.2, risk free rate is 2%, historic market risk premium is 5.5%. Assume the ratio of debt to equity is 2:1, and corporate tax rate is 20%." (c) Determine the WACC for Heart Limited.
Sabine Co has outstanding bonds with 10 years remaining until maturity, a coupon rate of 7%, semi-annual coupon payments, and a market price of 96.5% of par value. If the tax rate is 16%, what is the firm's after-tax cost of debt? Enter your answer as an annualized rate in decimal format, and show four decimal places. For example, if your answer is 5.1%, enter .0510.
StangWay Corp. stock is trading for $23 per share. StangWay has 24 million shares outstanding and a market debt-equity ratio of 0.59. StangWay's debt is zero coupon debt with a 5-year maturity and a yield to maturity of 9% EAR (effective annual rate). a. Describe StangWay's equity as a call option. What is the maturity of the call option? What is the market value of the asset underlying this call option? What is the strike price of this call option? b. Describe StangWay's debt using a call option.
What is the WACC for a company with the following information: Equity Information: 50 million shares, $80 per share, Beta = 1.15, Market risk premium =9%, Risk-free rate = 5%. Debt Information: 1 million outstanding bonds with a face value of $1,000 each. Current Price = $1,100, Coupon rate = 9%, semiannual coupons, 15 years to maturity Tax rate = 20%

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