he table below shows a book balance sheet for the Wishing Well Motel chain. The company’s long-term debt is secured by its real estate assets, but it also uses short-term bank loans as a permanent source of financing. It pays 14% interest on the bank debt and 10% interest on the secured debt. Wishing Well has 10 million shares of stock outstanding, trading at $83 per share. The expected return on Wishing Well’s common stock is 22%. (Table figures in $ millions.)                 Cash and marketable securities $ 110   Bank loan $ 280 Accounts receivable   180   Accounts payable   130 Inventory   50   Current liabilities $ 410 Current assets $ 340         Real estate   1,850   Long-term debt   1,390 Other assets   110   Equity   500 Total $ 2,300   Total $ 2,300   Calculate Wishing Well’s WACC. Assume that the book and market values of Wishing Well’s debt are the same. The marginal tax rate is 21%. (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)

The table below shows a book balance sheet for the Wishing Well Motel chain. The company's long-term debt is secured by its real estate assets, but it also uses short-term bank loans as a permanent source of financing. It pays 15% interest on the bank debt and 13% interest on the secured debt. Wishing Well has 10 million shares of stock outstanding, trading at $90 per share. The expected return on Wishing Well's common stock is 19%. (Table figures in $ millions.) Cash and marketable securities Accounts receivable Inventory Current assets Real estate Other assets Total $ Weighted-average cost of capital $ 90 250 50 $ 390 % 2,200 100 2,690 Bank loan Accounts payable Current liabilities Long-term debt Equity Total $ 350 150 $ 500 Calculate Wishing Well's WACC. Assume that the book and market values of Wishing Well's debt are the same. The marginal tax rate is 21%. Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place. 1,790 400 $ 2,690

CEG Capital Inc. is a large holding company that uses long-term debt extensively to fund its operations. At December 31, the company reported total assets of $100 million, total debt of $55 million, and total equity of $45 million. In January, the company issued $11 billion in long-term bonds to investors at par value. This was the largest debt issuance in the company’s history, and it significantly increased the company’s ratio of total debt to total equity. Five days after the debt issuance, CEG filed legal documents to prepare for an additional $50 billion long-term bond issue. As a result of this filing, the price of the $11 billion in bonds that the company issued earlier in the week dropped to 94 because of the increased risk associated with the company’s debt. The investors in the original $11 billion bond issuance were not informed of the company’s plans to issue additional debt so quickly after the initial bond issue.Did CEG Capital act unethically by not disclosing to initial…

Carla Vista Inc. is considering two alternatives to finance its construction of a new $1.40 million plant. (a) Issuance of 140,000 shares of common stock at the market price of $10 per share. (b) Issuance of $1,400,000, 7% bonds at face value. Complete the following table. (Round earnings per share to 2 decimal places, e.g. 0.25.) Income before interest and taxes Interest expense from bonds Income before income taxes Income tax expense (40%) Net income Outstanding shares Earnings per share $ Indicate which alternative is preferable. Issue Stock $600,000 Net income is because of the additional shares of stock that are outstanding. $ V if stock is used. However, earnings per share is Issue Bond $600,000 460,000 V than earnings per share if bonds are used