PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Chapter 19, Problem 3PS
Summary Introduction
To determine: WACC (Weighted average cost of capital)
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Consider the following information for Federated Junkyards of America. Debt: $65,000,000 book value outstanding. The debt is trading at 86% of book value. The yield to maturity is 9%. Equity: 1,500,000 shares selling at $32 per share. Assume the expected rate of return on Federated’s stock is 18%. Taxes: Federated’s marginal tax rate is Tc = 0.21. Calculate the weighted-average cost of capital (WACC).
Consider the following information for Federated Junkyards of America.
Debt: $76,000,000 book value outstanding. The debt is trading at 91% of book value. The yield to maturity is 10%.
Equity: 2,600,000 shares selling at $43 per share. Assume the expected rate of return on Federated’s stock is 19%.
Taxes: Federated’s marginal tax rate is Tc = 0.21.
Calculate the weighted-average cost of capital (WACC). (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
Use the following information to compute the weighted average cost of capital (WACC) of GoGo Inc.
▪ Debt information:
The beta of GoGo Inc. stock is 1.5
. Risk-free rate is 4%
• Market return is 15%
• GoGo's capital structure is 65% equity and 35% debt.
The tax rate is 21%.
14.62%
Bonds will mature in 9 years.
The maturity value is $1,000.
GoGo's WACC is..
15.47%
The coupon rate is 8%, with semiannual payments.
The current bond price is $1,015.
12.20%
13.32%
Chapter 19 Solutions
PRIN.OF CORPORATE FINANCE
Ch. 19.A - The U.S. government has settled a dispute with...Ch. 19.A - You are considering a five-year lease of office...Ch. 19 - WACC True or false? Use of the WACC formula...Ch. 19 - WACC The WACC formula seems to imply that debt is...Ch. 19 - Prob. 3PSCh. 19 - Prob. 4PSCh. 19 - WACC Whispering Pines Inc. is all-equity-financed....Ch. 19 - WACC Table 19.3 shows a book balance sheet for the...Ch. 19 - WACC Table 19.4 shows a simplified balance sheet...Ch. 19 - Prob. 8PS
Ch. 19 - WACC Nevada Hydro is 40% debt-financed and has a...Ch. 19 - Flow-to-equity valuation What is meant by the...Ch. 19 - APV True or false? The APV method a. Starts with a...Ch. 19 - APV A project costs 1 million and has a base-case...Ch. 19 - APV Consider a project lasting one year only. The...Ch. 19 - APV Digital Organics (DO) has the opportunity to...Ch. 19 - Prob. 17PSCh. 19 - Prob. 18PSCh. 19 - Prob. 19PSCh. 19 - Prob. 20PSCh. 19 - Prob. 22PSCh. 19 - Company valuation Chiara Companys management has...Ch. 19 - Prob. 26PSCh. 19 - Prob. 27PS
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