Question 14Your company has compiled the following data which is based on current costsrelative to its sources of external capital ie long-tem debt, preferred stock andcommon stock equity for various ranges of financing.Source af CapitalLong-lerm debtRange of Total New FinancingO toAfter-tax Cost4 %169759481697595 to3259148123259149 toaboveProferred stock17O to93603422936035 toaboveCommon stock equity180 to1141333211141334 to2808705252808705 to3549127263549127 toaboveCurent retained earmings in coming yearCost of rotained eamings based on current eaningsThe target capital structure proportions are:Target capital structureLong-term debt62898818 %32 %Preferred stock11 %Equity57 %Calculate the WACC prior to he firm exhausting its retained earringsAnswerThe firm expects its range of total new financing to beCalculate the WACC based on new range.Answer3156574

The weighted average cost of capital The weighted average cost of capital refers to a method for…

Question 14 Your company has compiled the folowing data which is based on cument costs reiative to is sources of external capital ie long-tem debt, preferred stock and common stock equity for various ranges of finanding Source of Capital Long derm debt Ater-tax Cost Range of Total New Financing 1697504 3259148 12 3259149 o above Pretered stock 17 936034 22 936036 o above Common stock equily 18 1141333 2808705 3549127 21 1141334 o 25 280870S 3549127 o above Curert retained eamirgs in coming year Cont of retained eamings based on curert eamings The target capital structure proportions are Target capital structure Long-derm debt Profered stock Equty 628968 18 % 32 % 11 % 57 % Calculate the WACC prior bo he fm exhausting its retained earnings Acswer The fem expects is ranga of total new francing to be Calcuate the WACC based on new range Answer 3156574

Question 14 Your company has compiled the folowing data which is based on cument costs reiative to is sources of external capital ie long-tem debt, preferred stock and common stock equity for various ranges of finanding Source of Capital Long derm debt Ater-tax Cost Range of Total New Financing 1697504 3259148 12 3259149 o above Pretered stock 17 936034 22 936036 o above Common stock equily 18 1141333 2808705 3549127 21 1141334 o 25 280870S 3549127 o above Curert retained eamirgs in coming year Cont of retained eamings based on curert eamings The target capital structure proportions are Target capital structure Long-derm debt Profered stock Equty 628968 18 % 32 % 11 % 57 % Calculate the WACC prior bo he fm exhausting its retained earnings Acswer The fem expects is ranga of total new francing to be Calcuate the WACC based on new range Answer 3156574

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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1. Information on the Black PLC fixed income investment portfolio is the following (in EUR): Company A Company B Company C Classification Available for sale Held to maturity Held to maturity Cost 35 000 40 000 53 000 Market value, 31 Dec 2013 39 000 38 000 52 000 Market value, 31 Dec 2014 38 000 37 000 55 000 What is the balance sheet carrying value of the Black PLC investment portfolio as 31.12.2014? The balance sheet carrying value of Black Inc.'s investment portfolio would be higher if which of the securities had been reclassified as held for trading security? Explain why. 2. Cellphone Inc. acquires 50% of Battery AG in 2014 and needs to record investment on its balance sheet. Year ending 2014 Cellphone Inc Battery AG Revenue 1700 1350 EBIT 153 135 Net Income 75 68 Total Assets 1421 1283 Shareholders' equity 735 706 Under which accounting method (full consolidation, proportionate consolidation, equity method) profit margin of Cellphone…
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Back to Assignment Attempts 0 Keep the Highest 0/2 5. The Cost of Capital: Cost of New Common Stock If a firm plans to issue new stock, flotation costs (investment bankers' fees) should not be ignored. There are two approaches to use to account for flotation costs. The first approach is to add the sum of flotation costs for the debt, preferred, and common stock and add them to the initial investment cost. Because the investment cost is increased, the project's expected rate of return is reduced so it may not meet the firm's hurdle rate for acceptance of the project. The second approach involves adjusting the cost of common equity as follows: Cost of equity from new stock r D IP-Fi +6 The difference between the flotation-adjusted cost of equity and the cost of equity calculated without the flotation adjustment represents the flotation cost adjustment. Quantitative Problem: Barton Industries expects next year's annual dividend, D₁, to be $2.50 and it expects dividends to grow at a…
QUESTION 4 A Company with net operating earnings of shs 300,000 is attempting to evaluate a number of possible capital structures, given below. Which of the capital structures will you recommend and why? Show your analysis. Debt After tax-Cost of Cost of equity debt (%) (%) Capital structure 1 2 3 4 5 300,000 10 400,000 10 500,000 11 600,000 12 700,000 14 12 12.5 13.5 15 18 =
Percent of capital structure: Preferred stock Common equity (retained earnings) Debt Additional information: Corporate tax rate Dividend, preferred Dividend, expected common Price, preferred Growth rate Bond yield Flotation cost, preferred Price, common 15% 45 40 35% Debt Preferred stock Common equity (retained earnings) Weighted average cost of capital $ 8.00 $ 3.50 $ 105.00 98 8% $ 10.40 $ 78.00 Calculate the weighted average cost of capital for Digital Processing Incorporated Note: Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places. Answer is complete but not entirely correct. Weighted Cost 5.20 % 8.33 11.50 25.03 %
Assume you are given the following information for firms A and B: A В $1,563,400.00 $2,357,316.00 $2,051,347.00 $1,257,431.00 Price $31.25 $31.25 i 13.52% 13.52% EBIT $97,347.00 $97,347.00 No taxes How do you replicate an investment in 79% of stock B by using stock A? What is the return of the replicating strategy?
classified stock founders’ shares American depository receipts (ADRs) Euro stock Yankee stock market price (value), intrinsic (theoretical) value, growth rate, g required rate of return, dividend yield capital gains yield expected rate of return, constant growth model nonconstant growth P/E ratio economic value added (EVA) Define All Words
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Which of the following statements are correct? Preferred equities are separate form common equities Opportunity cost should not be included in the capital budgeting decision Retained earnings are important in calculating the WACC Weights for equity in the WACC calculation are always on book values Cash from net working capital for each year is defined as NWCn- NWCn-1
atab=r1&sl=en&tl%3Dar&text%3DThe%20company's%20 = Google Translate The company's capital structure is as follows: Debt Weight 25%, Preferred Stock Weight 25%, Common equity Weight 50%. The cost of debt is 12%, the cost of preferred stock is 15% and the cost of common equity is 0.191. Calculate the company's weighted average cost of capital. Select one: a. 0.0655 b. 0.1255 C. All the given choices are not correct d. 0.1630 e. 0.1330 Clear my choice haykal almakha aldiyn 12 Type here to search Esc F1 F2 F3 F4 F5 F6 F7 F8 @ #3 24 * 2 T 3.
Triano Train Transports shows the following on their most recent balance sheet: Current Assets: 1871Total Liabilities: 1994Inventory: 458Net working Capital: 1111Total Assets: 3007Total Equity: 1636Total Debt: 2602Earnings per Share: 3.22Market Value: 60.03 You want to identify if the company is highly leveraged and therefore a higher risk for you as an investor. Specifically, you want to find out how much debt the company has in comparison to each dollar of equity. Determine which ratio to use, calculate it and put the number in the answer.

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