None The following is the capital structure of your company.Debt: 9,000 bonds. 5.8 annual % coupon, with semiannual payments. $1,000 facevalue. 24 years to maturity. Priced at $1,060 per bond.Preferred stock: 18,000 shares preferred stock. Priced at $81 per share. $3.60 dividendper share.Common Stock: 420,000 shares. Priced at $60 per share. Beta is 1.11.Market: 5% market risk premium. 4.6% risk-free rate. Company's tax rate is 24%.What is the company's Weighted Average Cost of Capital?(Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 12WACC%

Weighted average cost of capital (WACC) represents a company's average after-tax cost of capital…

Answered: The following is the capital structure…

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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You are given the following information on Parrothead Enterprises: Debt: 9,500 7 percent coupon bonds outstanding, with 25 years to maturity and a quoted price of 105.25. These bonds pay interest semiannually and have a par value of $1,000. Common stock: 250,000 shares of common stock selling for $65.00 per share. The stock has a beta of .95 and will pay a dividend of $3.20 next year. The dividend is expected to grow by 5 percent per year indefinitely. Preferred stock: 8,500 shares of 4.5 percent preferred stock selling at $94.50 per share. The par value is $100 per share. Market: , 11.5 percent expected return, risk - free rate of 3.85 percent, and a 25 percent tax rate. Calculate the company's WACC. Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g ., 32.16. WACC % You are given the following information on Parrothead Enterprises: Debt: Common stock: 9,500 7 percent coupon bonds outstanding, with 25 years to maturity and…
You are given the following information on Parrothead Enterprises: Debt: Common stock: Preferred stock: Market: 8,600 7.2 percent coupon bonds outstanding, with 23 years to maturity and a quoted price of 107. These bonds pay interest semiannually and have a par value of $2,000. WACC 285,000 shares of common stock selling for $65.70 per share. The stock has a beta of 1.02 and will pay a dividend of $3.90 next year. The dividend is expected to grow by 5.2 percent per year indefinitely. 9,200 shares of 4.6 percent preferred stock selling at $95.20 per share. The par value is $100 per share. 10.8 percent expected return, risk-free rate of 4.2 percent, and a 22 percent tax rate. Calculate the company's WACC. Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. %
You are given the following information on Parrothead Enterprises: Debt: Common stock: Preferred stock: 9,600 7.1 percent coupon bonds outstanding, with 24 years to maturity and a quoted price of 105.5 . These bonds pay interest semiannually and have a par value of $1,000. 255,000 shares of common stock selling for $65.10 per share. The stock has a beta of .96 and will pay a dividend of $3.30 next year. The dividend is expected to grow by 5.1 percent per year indefinitely. Market: 8,600 shares of 4.55 percent preferred stock selling at $94.60 per share. The par value is $100 per share. 11.4 percent expected return, risk-free rate of 3.9 percent, and a 21 percent tax rate. Calculate the company's WACC. Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal
S Examine the following book-value balance sheet for University Products Incorporated. The preferred stock currently sells for $15 per share and pays a dividend of $3 a share. The common stock sells for $10 per share and has a beta of 0.9. There are 4 million common shares outstanding. The market risk premium is 8%, the risk-free rate is 4%, and the firm's tax rate is 21%. Assets Cash and short-term securities $ 3.0 Accounts receivable. 3.0 Inventories Plant and equipment Total 7.0 25.0 $ 38.0 a. Market debt-to-value ratio b. WACC BOOK-VALUE BALANCE SHEET (Figures in 5 millions) Liabilities and Net Worth Bonds, coupon 5%, paid annually (maturity 10 years, current yield to maturity = 7%) Preferred stock (par value $20 per share) Common stock (par value $0.10) Additional paid-in stockholders' equity Retained earnings Total a. What is the market debt-to-value ratio of the firm? b. What is University's WACC? Note: For all the requirements, do not round intermediate calculations. Enter your…
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
You are given the following information concerning Parrothead Enterprises: Debt: Common stock: 285,000 shares of common stock selling for $65.70 per share. The stock has a beta of .97 and will pay a dividend of $3.90 next year. The dividend is expected to grow by 5.2 percent per year indefinitely. Preferred stock: 9,200 shares of 4.60 percent preferred stock selling at $95.20 per share. Market: 10,200 7.2 percent coupon bonds outstanding, with 23 years to maturity and a quoted price of 107.00. These bonds pay interest semiannually. An expected return of 10.8 percent, a risk-free rate of 5.10 percent, and a 30 percent tax rate. Show Transcribed Text What is the firm's cost of each form of financing? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Aftertax cost of debt Cost of preferred stock Cost of equity WACC % Calculate the WACC for the company. (Do not round intermediate calculations and enter your answer as a…
You are looking at the following information: Debt: Common stock: Preferred stock: Market: 5,000 8.5 percent coupon bonds outstanding, $1,000 par value, 21 years to maturity, selling for 103 percent of par; the bonds make semiannual payments. 110,000 shares outstanding, selling for $62 per share; the beta is 1.2. 16,000 shares of 7.5 percent preferred stock (review my Ch.8 slide 43: what does ...% preferred stock" phrase mean?) outstanding, currently selling for $104 per share. 9.5 percent market risk premium and 7.5 percent risk-free rate. The company is in the 33 percent tax rate bracket based on its corporate income. Required: Find the WACC. (Do not round your intermediate calculations.)
4. Consider the following book value balance sheet of ABC, in which all figures are in million dollars. The preferred stock currently sells for $15 per share and the common stock for $20 per share. There are 1 million common shares outstanding. Assets Liabilities and Net Worth Cash and short-term securities S1 Bonds with coupon rate of 8% paid annualy, maturity of 10 years and the current yield to maturity of 9% $10 Account receivables $3 Preferred stock (par value $10 per share) $2 Inventories $7 Common stock $10 Plant and equipment $21 Retained earnings $10 Total $21 $21 a) What is the capital structure of the firm based on market values? b) The preferred stock pays a dividend of $2 per share, the beta of the common stock is 1.5, the market risk premium is 7%, the risk-free rate is 4%, and the firm’s tax rate is 40%. ABC’s bonds have coupon rate of 6%, and currently are trading at par. What is the firm’s weighted average cost of capital (WACC)?…
Consider the following book value balance sheet of ABC, in which all figures are in million dollars. The preferred stock currently sells for $15 per share and the common stock for $20 per share. There are 1 million common shares outstanding. Assets Liabilities and Net Worth Cash and short-term securities S1 Bonds with coupon rate of 8% paid annualy, maturity of 10 years and the current yield to maturity of 9% $10 Account receivables $3 Preferred stock (par value $10 per share) $2 Inventories $7 Common stock $10 Plant and equipment $21 Retained earnings $10 Total $32 $32 a) What is the capital structure of the firm based on market values? b) The preferred stock pays a dividend of $2 per share, the beta of the common stock is 1.5, the market risk premium is 7%, the risk-free rate is 4%, and the firm’s tax rate is 40%. ABC’s bonds have coupon rate of 6%, and currently are trading at par. What is the firm’s weighted average cost of capital (WACC)?…
Consider the following for watson power company. Debt 5,500 6.5% coupon bonds outstanding. 1,000 par value, 22 years to maturity, selling for 104% of par, semi-annual payments Common Stock 1325,000 shares outstanding selling for $63/share. Beta is 1.19 Preferred Stock 18,000 6 % preferred stock outstanding selling for $107/share. Market 8% market risk premium, 6% risk-free rate Company's tax rate is 34% What is WACC?
Consider the following information for Watson Power Company: Debt: Common stock: Preferred stock: Market: 4,000 8 percent coupon bonds outstanding, $1,000 par value, 21 years to maturity, selling for 102 percent of par; the bonds make semiannual payments. Find the WACC. 96,000 shares outstanding, selling for $56 per share; the beta is 1.07. 13,500 shares of 7 percent preferred stock outstanding, currently selling for $104 per share. 9.5 percent market risk premium and 7 percent risk-free rate. Assume the company's tax rate is 34 percent.
Suppose that you just purchased 250 shares of Beta Banana's stock for $70 per share. The initial margin requirement is 70.0%, which means the amount borrowed is $5,250. The corresponding balance sheet is below: Liabilities and Equity Stock Total assets Margin percentage Assets Required: a. Now suppose the price of the stock falls to $41 per share. What is your current margin percentage? (Round your answer to 2 decimal places.) b. Construct the balance sheet to show the current situation. Stock Total assets $ 17,500.00 $ 17,500.00 c. If the maintenance margin is 50%, at what stock price would you get a margin call? (Round your answer to 2 decimal places.) Price Loan from broker. Equity Total liabilities and equity Assets % $ 5,250.00 $ 12,250.00 $ 17,500.00 Liabilities and Equity Loan from broker Equity Total liabilities and equity

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