The company has 60 million outstanding shares and is currently trading on TSX for $85 per share. Its Beta, based on the 5-year daily stock prices, is 1.23. The risk - free rate is 3.85%, and the market risk premium is 8%. The company also has a debt of 3 million bonds with 15 years to maturity. The coupon rate is 9%, paid annually, and is available for purchase at $1150. The tax rate is 25%. Calculate WACC
Q: You are managing a stock portfolio for a client that contains three assets, A, B, C. You currently…
A: Let's summarize the data given:Asset A: Expected return (E(r)) = 19%, Standard deviation (SD) =…
Q: A stock price is currently 50 and after 6-months it can be either 60 or 42. The risk-free rate is…
A: Here,StockPrice is $50Risk Free Rate is 12% continous compoundingTime Period is 6 monthsStock Price…
Q: Problem 9-13 Portfolio Return (LG9-7) Year-to-date, Oracle had earned a -1.39 percent return. During…
A: StockWeightReturnsOracle15%-1.39%Valero Energy20%7.65%McDonald's65%0.42%
Q: Required information [The following information applies to the questions displayed below.] A pension…
A: Expected return of Stock funds (S)16%Expected return of Bond funds (B)10%Risk-free rate5.50%Standard…
Q: Skysong Corp. is planning to replace an old asset with new equipment that will operate more…
A: Over a certain period of time, the difference between the present value of cash inflows and outflows…
Q: randtly Industries Invests a large sum of money in R&D; as a result, it retains and reinvests all of…
A: Value of firm can be found out from present value of cash flow and from that we can value of equity.
Q: Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence,…
A: The value of a stock is its intrinsic worth. Essentially what it's worth based on its future earning…
Q: Modern Artifacts can produce keepsakes that will be sold for $50 each. Nondepreciation fixed costs…
A: Price = $50Fixed costs = $2,500Variable costs = $30Initial investment = $2,000Useful life = 5…
Q: A7X Corporation just paid a dividend of $1.60 per share. The dividends are expected to grow at 40…
A:
Q: Heavy Metal Corporation is expected to generate the following free cash flows over the next five…
A: Net present value(NPV):It is the difference between the present value of cash outflows and present…
Q: You are evaluating two different silicon wafer milling machines. The Techron I costs $270,000, has a…
A: Cost of Techron I = $270,000Life = 3 yearsPre-tax operating costs = $73,000Cost of Techron II =…
Q: Use the corporate valuation model to find the intrinsic value of a firm with a long run growth in…
A: Value of company is the present value of free cash flow of the company based on the cost of capital…
Q: The followings are the instructions for this case. Provide the excel file where the computations are…
A: To provide the answers to your questions, I'll first gather the required information from…
Q: Assume that your cousin holds just one stock, Eastman Chemical Bonding (ECB), which he thinks has…
A: Sure, let's simplify the calculation without using mathematical symbols like fractions or…
Q: Rundle Company is considering investing in two new vans that are expected to generate combined cash…
A: NPV is used in capital budgeting to make project accept/reject decisions. A profitable project will…
Q: Linda is taking out an amortized loan for $91,000 to open a small business and is deciding between…
A: Loan amount = $91,000Maturity of credit union loan = 8 yearsAnnual interest rate = 13.30%Maturity of…
Q: You've collected the following information from your favorite financial website. 52-Week Price…
A: The required rate of return is the minimum percentage of profit that an investor expects to earn on…
Q: Calculate the correlation coefficient (PAB) for the following situation: (Round intermedi decimal…
A: The correlation coefficient of a portfolio measures the degree of linear relationship between the…
Q: The value of Gillette's stock is Enter your response here
A: The distribution of profits by a company to its eligible shareholders is called dividend. The amount…
Q: Calculate the durations and volatilities of securities A, B, and C. The interest rate is 8%,…
A: The objective of this question is to calculate the durations and volatilities of three different…
Q: You are given the following information concerning three portfolios, the market portfolio, and the…
A: The Sharpe ratio evaluates returns relative to risk, the Treynor ratio assesses systematic risk, and…
Q: On Monday morning you sell one June T-bond futures contract for $978.43. The contract's face value…
A: Given:Face value of the contract = $1,000Initial margin requirement = $27 per contract
Q: 2. Consider the production functions given below: a. Suppose that the production function faced by a…
A: The objective of the question is to analyze the production function of a bread producer, determine…
Q: If you are trying to build credit by using a credit card, each time you make a purchase with the…
A: Credit cardA sort of credit facility offered by banks is a credit card, which enables users to…
Q: Walter Utilities is a dividend-paying company and is expected to pay an annual dividend of $2.25 at…
A: The objective of the question is to calculate the expected rate of return for Walter Utilities'…
Q: (Bond valuation) Calculate the value of a bond that will mature in 14 years and has a $1,000 face…
A: A Bond refers to a concept that is defined as an instrument that represents the loan being made by…
Q: The expected return of Waterway is 19.3 percent, and the expected return of Wildhorse is 24.3…
A: The standard deviation of the portfolio is the combined risk due to assets incorporated with their…
Q: cYou observe that the exchange rates for Japanese Yen at Tokyo Bank are given as follows: bid…
A: Bid in Japan = ¥101/$Ask in Japan = ¥102/$Bid in New York =$0.0097/¥Ask in New York =…
Q: You buy a bond today with market price of $1200, with a coupon rate of 10%, par value of $1000, and…
A: The objective of this question is to calculate the annual realized return on a bond investment. The…
Q: 5. If an investor is long/the buyer a CDS they are deemed to have the economic interest of being…
A: When an investor buys a Credit Default Swap (CDS), they are essentially purchasing protection…
Q: A firm is considering the purchase of a new machine to increase the output of an existing production…
A: MARR stands for Minimum Acceptable Rate of Return refers to the rate of return a company expects to…
Q: Sales can increase by $ that is by
A: Self Supporting Growth Rate:The highest growth rate that a business may attain without depending on…
Q: Dave currently makes monthly payments towards a 25-year mortgage of $290000 with an interest rate of…
A: The mortgage amount is :After making the 67th payment, the monthly payment was reduced by $700.The…
Q: You are buying a house and will borrow $325,000 on a 25-year fixed rate mortgage with monthly…
A: Mortgage:A mortgage is a financial arrangement where a borrower obtains funds from a lender to…
Q: Which situation is generally a consequence of overly lenient loan repayment terms A. The borrower…
A: The general consequence of overly lenient loan repayment terms will be:Answer: Option C, The…
Q: Courtney Limited has capital project opportunities each of which would require an initial investment…
A: Net Present Value (NPV) is a financial measure used to analyze the profitability of an investment by…
Q: Goodwill represents the merger premium. True or False
A: In this question, we are required to determine whether the statement regarding goodwill is true or…
Q: Suppose your firm has decided to use a divisional WACC approach to analyze projects. The firm…
A: DivisionWACCDivision A9.75%Division B11.50%Division C12.20%Division D13.25%Explanation:Step 1:…
Q: Use the following inputs and the finite horizon from of the residual income model to compute the…
A: Share valuation is the process of determining the intrinsic value of a company's stock or shares. It…
Q: Ted, Will, Mike, and Tom own a 20-room home as tenants in common. Mike and Tom, two of the owners,…
A: The question is asking whether Mike and Tom, who are part of a tenancy in common, can legally sell…
Q: What secondary source of data can I use for the following research topic: COVID-19 : A Threat to the…
A: The objective of the question is to identify secondary sources of data that can be used for research…
Q: I need help with the remaining questions. This only answers the already answered ones.
A: Stock valuation is the process of determining the intrinsic value of a company's shares based on…
Q: An investment pays $4,000 per year at the beginning of each year for the next 4 years and then…
A: The time value of money is a foundational finance concept that accounts the effects of compounding…
Q: A Treasury bond with 11 years to maturity is currently quoted at 113:9. The bond has a coupon rate…
A: The yield value is often associated with investments such as bonds. It represents the income…
Q: Prepare an amortization schedule for a five-year loan of $67,000. Assume the loan agreement calls…
A: An amortization schedule is a line-by-line breakdown of the amount of your loan payment each month…
Q: 3) Consider two individuals, Susan and Rachel, who are deciding how much education to receive. The…
A: MRR is the rate at which additional money can be borrowed and that is based on the risk involved.
Q: Pappy's Potato has come up with a new product, the Potato Pet (they are freeze-dried to last…
A: Capital budgeting is a procedure of allocating the company's resources to value-generating projects,…
Q: Reasons detailing how a max $20,000 scholarship would improve someone's situation.
A: Reasons detailing how a max $20,000 scholarship would improve someone's situation:Financial Relief:…
Q: Q4. (a) 'Capital budgeting Comment. (b) India Organics Ltd. is considering an investment proposal.…
A: The objective of the question is to provide a brief understanding of capital budgeting and to…
Q: (Appendix 13A and 13B) A company anticipates a tax-deductible cash expense of $40,000 in year 2 of a…
A: The present value of a cash outflow is the current worth of a future sum of money that is to be paid…
Step by step
Solved in 3 steps with 2 images
- Jasper's, Inc. is expected to pay an annual dividend of $1.21 per share next year. This dividend is expected to increase by 3.5 percent annually. Jasper's also pays a 6 percent, annual coupon on its outstanding bonds. These bonds mature in 12.5 years and have a face value of $1,000. The firm's stock has a beta of 1.38 and a market price of $42.60 a share. The bonds are priced at $1,064 each. The market risk premium is 9.5 percent, the risk-free rate is 3.7 percent, and the tax rate is 32 percent. What is the firm's weighted average cost of capital if its debt-equity ratio is 0.36? A) 9.46 percentB) 9.58 percentC) 9.64 percentD) 9.69 percentRunning Shoes, Inc. has 2 million shares of stock outstanding. The stock currently sells for $15 per share. The firm's debt is publicly traded and has five years until maturity. The current value of the firm's bonds is $14.1016 million with a yield to maturity of 8%. The risk free rate is 2% and the market risk premium is 9%. You've estimated that the firm has a beta of 1.7. The corporate tax rate is 30%. Hint: find the market value of the debt. What percentage of Running Shoes, Inc. is financed with debt? (Answer in decimal form)Spartan Machinery stock trades at $60 per share with a beta of 1.5, an estimated market return of 12%, and a risk free rate of 5%. There are 20 million shares outstanding. The company has bonds with a face value $1 billion outstanding and a market value of $980 million. The coupon rate is 9% (semiannual coupons) and there are 10 years to maturity. The company has a tax rate of 38%. What is the WACC?
- ROFL Limited has asked you to calculate the debt component to help in its calculation of its weighted average cost of capital (WACC). ROFL has 7,000 Corporate Bonds outstanding with a face value of $29,000 each. The coupon rate is 3% p.a. compounding semi-annually. The bonds mature in 20 years and currently ROFL bonds are trading in the market at a yield of 6%p.a. If a coupon payment was paid today what is the total market value of ROFL’s issued bonds? Provide your answer to the nearest dollar.A firm is planning on issuing new bonds and equity. The semiannual bonds will have a coupon rate 9% with a maturity of 15 years. The preferred stock pays a dividend of $6. The common stock's current dividend is $2.50 with a growth rate of 7%. The flotation costs on bonds is 5%, 7% on preferred stocks and 10% on common stock. The tax rate is 35%. The current price of the bonds is $975 while the price of the common stock is $53.50 and $55 for the preferred stock. If the growth rate falls to 6%, what is change in the cost of external equity? external equity falls by 8.5% external equity falls by 7% external equity falls by 6.5% external equity falls by 6%A firm has 2,000,000 shares of common stock outstanding with a market price of $2.00 per share. It has 2,000 bonds outstanding, each selling for $1,200. The bonds mature in 15 years, have a coupon rate of 10%, and pay coupons annually. The firm’s beta is 1.2, the risk free rate is 5%, and the market risk premium is 7%. The tax rate is 34%. Calculate the WACC.
- The GiN Corp. is expected to pay a dividend of $3 which is expected to grow at 2% for a foreseeable futuré. The stock of the GiN Corp. is currently selling at a market price of $40. The company recently expanded its operations by issuing 10-year Corporate bond at par value ($1,000) which pays an annual coupon payment of $80. If the debt-equity ratio of the company is 0.40 and the corporate tax rate is 30%, what is the weighted average cost of capital of the company? Calculate the weighted average cost of capital. (A) The weighted average cost of capital is 9.50% (B) The weighted average cost of capital is 8.39% (C) The weighted average cost of capital is 8.00% (D) The weighted average cost of capital is 5.60% Answer Activate Windows Go to Settings to activate Windows C Type here to search ENG 00:18 4の IN 02-11-2020 A B 00Acort Industries has 8 million shares outstanding and a current share price of $43 per share. It also has long-term debt outstanding. This debt is risk free, is four years away from maturity, has an annual coupon rate of 8%, and has a $106 million face value. The first of the remaining coupon payments will be due in exactly one year. The riskless interest rates for all maturities are constant at 4.8%. Acort has EBIT of $80 million, which is expected to remain constant each year. New capital expenditures are expected to equal depreciation and equal $14 million per year, while no changes to net working capital are expected in the future. The corporate tax rate is 28%, and Acort is expected to keep its debt-equity ratio constant in the future (by either issuing additional new debt or buying back some debt as time goes on). a. Based on this information, estimate Acort's WACC. b. What is Acort's equity cost of capital? Question content area bottom a. Based on this…The GiN Corp. is expected to pay a dividend of $3 which is expected to grow at 2% for a foreseeable future. The stock of the GiN Corp. is currently selling at a market price of $40. The company recently expanded its operations by issuing 10-year Corporate bond at par value ($1,000) which pays an annual coupon payment of $80. If the debt-equity ratio of the company is 0.40 and the corporate tax rate is 30%, what is the weighted average cost of capital of the company? Calculate the weighted average cost of capital. The weighted average cost of capital is 9.50% The weighted average cost of capital is 5.60% The weighted average cost of capital is 8.39% The weighted average cost of capital is 8.00%
- Acort Industries has 10 million shares outstanding and a current share price of $43 per share. It also has long-term debt outstanding. This debt is risk free, is four years away from maturity, has an annual coupon rate of 6%, and has a $111 million face value. The first of the remaining coupon payments will be due in exactly one year. The riskless interest rates for all maturities are constant at 3.6%. Acort has EBIT of $92 million, which is expected to remain constant each year. New capital expenditures are expected to equal depreciation and equal $20 million per year, while no changes to net working capital are expected in the future. The corporate tax rate is 26%, and Acort is expected to keep its debt-equity ratio constant in the future (by either issuing additional new debt or buying back some debt as time goes on). a. Based on this information, estimate Acort's WACC. b. What is Acort's equity cost of capital? a. Based on this information, estimate Acort's WACC. The WACC is%.…Acort Industries has 11 million shares outstanding and a current share price of $38 per share. It also has long-term debt outstanding. This debt is risk free, is four years away from maturity, has an annual coupon rate of 9%, and has a $115 million face value. The first of the remaining coupon payments will be due in exactly one year. The riskless interest rates for all maturities are constant at 5.4%. Acort has EBIT of $93 million, which is expected to remain constant each year. New capital expenditures are expected to equal depreciation and equal $19 million per year, while no changes to net working capital are expected in the future. The corporate tax rate is 23%, and Acort is expected to keep its debt-equity ratio constant in the future (by either issuing additional new debt or buying back some debt as time goes on). a. Based on this information, estimate Acort's WACC. b. What is Acort's equity cost of capital? a. Based on this information, estimate Acort's WACC. The WACC is%.…Big Door Company has 8.7 million shares outstanding, which are currently trading for about $13 per share and have a levered equity beta of 1.2. Big Door has 19,900 outstanding bonds, with a 4% coupon rate, payable semi-annually and due in 10 years. The bonds are rated BBB. Currently the credit spread for BBB is 178 basis points over equivalent-maturity Government of Canada debt. The current yield on 10-year Canada bonds is 5%, compounded semi-annually. The risk-free interest rate is 2%, and the market risk premium is 6.6%. The company has a 35% tax rate. (Do not round intermediate calculations.) a. Calculate Big Door's WACC. (Round your answer to 2 decimal places.) WACC b. Calculate Big Door's unlevered beta, using the following formula: (Round your answer to 2 decimal places.) Pleveret Pdebtx (1–Tc)×D/E BU 1+(1–Tc)×D/E es Unlevered beta c. If Big Door was 50% debt-financed, what would be its WACC? Assume that the beta of its debt is unchanged by the capital structure change. (Round…
