Partridge Pear Tree Farms holds equity and debt in its capital structure at equal weights. It does not have any preferred stock. The cost of equity capital is 14.59% while the before-tax cost of debt capital is 7.24%. If the company's tax rate is 21%, what is the company's weighted average cost of capital (WACC)?

Partridge Pear Tree Farms holds equity and debt in its capital structure at equal weights. It does not have any preferred stock. The cost of equity capital is 14.59% while the before-tax cost of debt capital is 7.24%. If the company's tax rate is 21%, what is the company's weighted average cost of capital (WACC)?

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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Sandhill Co. has a capital structure, based on current market values, that consists of 25 percent debt, 19 percent preferred stock, and 56 percent common stock. If the returns required by investors are 8 percent, 12 percent, and 15 percent for the debt, preferred stock, and common stock, respectively, what is Sandhill’s after-tax WACC? Assume that the firm’s marginal tax rate is 28 percent.
Company A has a debt to equity ratio to one. Its cost of equity is 20% and its cost of debt is 10%. Assuming a tax rate of 50%. Company A's weighted average cost of capital is? (write the process of calculation.)
Oxy Corporation uses debt, preferred stock, and common stock to raise capital. The firm's capital structure targets the follwoing proportions: debt, 43%; preferred stock, 11%; and common stock, 46%. If the cost of debt is 6.4%, preferred stock costs 9.5%, and common stock cost 11.7%, what is Oxy's weighted average cost of capital (WACC)?
Fama's Llamas has a weighted average cost of capital of 9.4 percent. The company's cost of equity is 13 percent, and its pretax cost of debt is 6.7 percent. The tax rate is 22 percent. What is the company's target debt-equity ratio? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., .1616.) L Debt-equity ratio
Company X has debt and equity as source of funds..Company X has market value of debt as $ 150000 and a book value of debt as $ 80000. The company has book value of equity as $ 100000 and market value of equity as $ 125000. The cost of debt is 8.25% and cost of equity is 9.57%. The tax rate is 38%. What is WACC?
Question: Fama's Llamas has a weighted average cost of capital of 9.5%. The company's cost of equity is 11%, and its cost of debt is 7.5%. The tax rate is 40%. What is the company's debt- equity ratio? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.)
Bulldogs Inc., that has an applicable tax rate of 25%, is half funded by the creditors and the remaining by ordinary shareholders. The Weighted Average cost of Capital of the firm is 20%. Based on the discounted cash flow model the Bulldogs Inc. computed its cost of equity at 10%. What is the after-tax cost of debt? (In percentage, type the percentage sign on your answer)
Salalah Mineral water has found that its cost of common equity capital is 18 percent and its cost of debt capital is 8 percent . If the firm in financed with 60 percent common shares and 40 percent debt then what is the after - tax weighted average cost of capital for salalah Mineral water if it is subject to a 40 percent marginal tax rate ? Select one A.11.50 b . None of these C. 1457 d . 1272
Marginal Incorporated (MI) has determined that its before-tax cost of debt is 7.0%. Its cost of preferred stock is 11.0%. Its cost of internal equity is 16.0%, and its cost of external equity is 21.0%. Currently, the firm's capital structure has $295 million of debt, $45 million of preferred stock, and $160 million of common equity. The firm's marginal tax rate is 45%. The firm is currently making projections for the next period. Its managers have determined that the firm should have $55 million available from retained earnings for investment purposes next period. What is the firm's marginal cost of capital at a total investment level of $242 million? 9.18% 8.38% 9.98% 11.84% 10.24%
Majan Mining has found that its cost of common equity capital is 17 percent and its cost of debt capital is 6 percent. If the firm is financed with OMR 3,000,000 of common shares (market value) and OMR 2,000,000 of debt, then what is the after-tax weighted average cost of capital for Majan Mining if it is subject to a 40 percent marginal tax rate? Select one: O a. 11.50 b. 14.57 O c. 11.64 O d. None of these
A firm has a cost of debt of 6.6 percent and a cost of equity of 12.1 percent. The debt-equity ratio is 78. There are no taxes. What is the firm's weighted average cost of capital? Multiple Choice 10.20% 8.07% 9.69% 8.94% 8.72%
A company finances its operations and growth opportunities, using common equity and debt. The debt-to-equity ratio of the CI Corp. is 0.3. If its cost of equity is 14%, and its pretax cost of debt is 5%, what comes closest to the company’s WACC? The tax rate is 21%. 6.7% 4.5% 7.1% 6.3% 5.8% The answer is not 7.1%

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