The Lewin Inc. has the following financing outstanding. What is the WACC for thecompany?Debt60,000 bonds with an 8% coupon rate and a quoted price of110; the bonds have 30 years to maturity; the bonds makeannual payments; $1,000 par value.100,000 shares of 6% preferred with a current price of$150, and a par value of $100.2,000,000 shares of common stock, the current price is $80,and the beta of the stock is 1.2.The corporate tax rate is 25%, the market risk premium is6%, and the risk-free rate is 3%.Preferred stockCommon stockMarket(1) What is the aftertax cost of the debt? (Note:7%

After tax cost of debt is the interest paid on debt minus the income tax savings because of interest…

Answered: The Lewin Inc. has the following…

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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The Lewin Inc. has the following financing outstanding. What is the WACC for the company? Debt 60,000 bonds with an 8 % coupon rate and a quoted price of 110; the bonds have 30 years to maturity; the bonds make annual payments; $1,000 par value. 100,000 shares of 6% preferred with a current price of $150, and a par value of $100. 2,000,000 shares of common stock, the current price is $80, and the beta of the stock is 1.2 The corporate tax rate is 25%, the market risk premium is 6%, and the risk-free rate is 3% Preferred stock Common stock Market Required: (1) What is the aftertax cost of the debt?
The Lewin Inc. has the following financing outstanding. What is the WACC for the company? Debt 60,000 bonds with an 8% coupon rate and a quoted price of 110; the bonds have 30 years to maturity; the bonds make annual payments; $1,000 par value. 100,000 shares of 6% preferred with a current price of $150, and a par value of $100. 2,000,000 shares of common stock, the current price is $80, and the beta of the stock is 1.2. The corporate tax rate is 25%, the market risk premium is 6%, and the risk-free rate is 3%. Preferred stock Common stock Market What is the weighted average cost of capital for Lewin Inc.?
The Lewin Inc. has the following financing outstanding. What is the WACC for the company? Debt 60,000 bonds with an 8% coupon rate and a quoted price of 110; the bonds have 30 years to maturity; the bonds make annual payments; $1,000 par value. 100,000 shares of 6% preferred with a current price of $150, and a par value of $100. 2,000,000 shares of common stock, the current price is $80, and the beta of the stock is 1.2. The corporate tax rate is 25%, the market risk premium is 6%, and the risk-free rate is 3%. Preferred stock Common stock Market (2) What is the cost of Preferred stocks?
The Lewin Inc. has the following financing outstanding. What is the WACC for the company? Debt 60,000 bonds with an 8% coupon rate and a quoted price of 110; the bonds have 30 years to maturity; the bonds make annual payments; $1,000 par value. Preferred stock 100,000 shares of 6% preferred with a current price of $150, and a par value of $100. 2,000,000 shares of common stock, the current price is $80, and the beta of the stock is 1.2. The corporate tax rate is 25%, the market risk premium is 6%, and the risk-free rate is 3%. Common stock Market (3) What is the cost of common stocks?
The Saunders Investment Bank has the following financing outstanding. Debt: 47,000 bonds with a coupon rate of 5.2 percent and a current price quote of 105.5; the bonds have 16 years to maturity and a par value of $1,000. 16,300 zero coupon bonds with a price quote of 25.3, 25 years until maturity, and a par value of $10,000. Both bonds have semiannual compounding. Preferred stock: 142,000 shares of 3.7 percent preferred stock with a current price of $89 and a par value of $100. Common stock: 2,040,000 shares of common stock; the current price is $79 and the beta of the stock is 1.15. Market: The corporate tax rate is 22 percent, the market risk premium is 7.2 percent, and the risk-free rate is 3.2 percent. What is the WACC for the company?
b. The Saunders Investment Bank has the following financing outstanding. What is the WACC for the company? Debt: 60,000 bonds with a coupon rate of 6 percent and a current price quote of 109.5; the bonds have 20 years to maturity. 230,000 zero coupon bonds with a price quote of 17.5 and 30 years until maturity. Preferred stock: 150,000 shares of 4 percent preferred stock with a current price of GH¢ 79, and a par value of GH¢ 100. Common stock: 2,600,000 shares of common stock; the current price is GH¢ 65 and the beta of the stock is 1.15. Market: The corporate tax rate is 40 percent, the market risk premium is 7 percent, and the risk- free rate is 4 percent.
The IPO Investment Bank has the following financing outstanding. Debt: 20,000 bonds with a coupon rate of 12 percent and a current price quote of 110; the bonds have 20 years to maturity. 190, 000 zero coupon bonds with a price quote of 20.5 and 30 years until maturity. Both bonds have a par value of $1,000 and semiannual coupons. Preferred stock: 110,000 shares of 10 percent preferred stock with a current price of $85, and a par value of $100. Common stock: 2,200, 000 shares of common stock; the current price is $71, and the beta of the stock is 1.45. Market: The corporate tax rate is 21 percent, the market risk premium is 5 percent, and the risk - free rate is 2 percent. What is the WACC for the company? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Assets, Incorporated, plans to issue $8 million of bonds with a coupon rate of 7.6 percent, a par value of $1,000, semiannual coupons, and 25 years to maturity. The current market interest rate on these bonds is 7.1 percent. In one year, the interest rate on the bonds will be either 9 percent or 4 percent with equal probability. Assume investors are risk-neutral. a.lf the bonds are noncallable, what is the price of the bonds today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b.lf the bonds are callable one year from today at $1,040, will their price be greater or less than the price you computed in part (a)? multiple choice Greater Lesser
CG Forest and Paper LTD. raises capital; by selling 5,000,000 worth of debt with flotation xost equal to 3% of its par value. If the debt matures in 15 years and has coupon rate of 6% (paid annually).What is the bond's YTMSubject: Financial Accounting
PLEASE SHOW CALCULATION AND FORMULA, THANKYOUCompany A has the following:Debt: 50,000 bonds with a coupon rate of 5.7 percent and a current price quote of 106.5; the bonds have 20 years to maturity. 200,000 zero coupon bonds with a price quote of 17.5 and 30 years until maturity. Preferred stock: 125,000 shares of 4 percent preferred stock with a current price of $79, and a par value of $100. Common stock: 2,300,000 shares of common stock; the current price is $65, and the stock beta is 1.20. Market: The corporate tax rate is 40 percent, the market risk premium is 7 percent, and the risk-free rate is 4 percent. a. What is the cost of equity? (0.75) b. What is the cost of debt after tax
Assets, Ic., plans to issue $6 million of bonds with a coupon rate of 11 percent, a par value of $1,000, semiannual coupons, and 15 years to maturity. The current market interest rate on these bonds is 8 percent. In one year, the interest rate on the bonds will be either 12 percent or 8 percent with equal probability. Assume investors are risk- neutral. a. If the bonds are noncallable, what is the price of the bonds today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Price of the bonds b. If the bonds are callable one year from today at $1,060, will their price be greater or less than the price you computed in part (a)? O Greater O Lesser
The New Dance LLC. has 10,000 perpetual bonds outstanding, a par value of $1000. Also, The bonds have a coupon rate of 5% paid annually. The nomial interest rate on these bonds is 8%. This LLC. also has 2 million shares of stock outstanding with a market price of $30/share. What is this LLC.'s market value debt equity ratio?

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