Market value of common stock = 5,000,000 * 7 = 35,000,000
Market value of debt = 10,000,000 (since coupon rate is equal to yield to maturity, face value will be equal to price)
Total market value of capital structure = 35,000,000 + 10,000,000 = 45,000,000
WACC = (35,000,000 / 45,000,000)*0.11 + (10,000,000 / 45,000,000)*0.06*(1 - 0.3)
WACC = 0.085556 + 0.009333
WACC = 0.0949
QUESTION 5 RON Ltd has the following capital structure components: • Five million shares issued with...
RON Ltd has the following capital structure components: Five million shares issued with a current market price of 11. Equity holders require a 8% return. $10 million face value of Corporate bonds outstanding. These bonds pay an annual coupon of 6% and currently trade at a yield to maturity of 6%. If the firm faces a corporate tax rate of 30%, compute RON Ltd's Weighted Average Cost of Capital (WACC). Enter your answer in decimal form to FOUR decimal places....
RON Ltd has the following capital structure components: Five million shares issued with a current market price of 10. Equity holders require a 14% return. $10 million face value of Corporate bonds outstanding. These bonds pay an annual coupon of 6% and currently trade at a yield to maturity of 6%. If the firm faces a corporate tax rate of 30%, compute RON Ltd's Weighted Average Cost of Capital (WACC). Enter your answer in decimal form to FOUR decimal places....
The Eastinger Corporation has a capital structure consists of 125,000 bonds and 1.5 million shares of common stock. Their stock sells at $100 per share. The company's annual coupon bonds have 12 years to maturity, an 8 percent annual coupon, a face value of $1,000, and a current price of $927.52. The risk free rate is 4 percent and the market risk premium is 6 percent. The company’s common stock has a beta of 1.2. Eastinger's marginal tax rate is...
Question 2 Orange Corp has 1 million shares outstanding, and the stock is currently trading at $10 per share. The company has two different bonds outstanding. First, it has 5000 zero coupon bonds outstanding. Each zero coupon bond has a face value of $1000, will mature in 5 years, and is currently priced at 65% of face value. Second, the company has 5000 coupon paying bonds outstanding. Each coupon paying bond is currently priced at $940.00, and the YTM is...
Question 2 Orange Corp has 1 million shares outstanding, and the stock is currently trading at $10 per share. The company has two different bonds outstanding. First, it has 5000 zero coupon bonds outstanding. Each zero coupon bond has a face value of $1000, will mature in 5 years, and is currently priced at 65% of face value. Second, the company has 5000 coupon paying bonds outstanding. Each coupon paying bond is currently priced at $940.00, and the YTM is...
Question 5 (16 marks) Incarius Ltd has asked you to estimate the WACC for their company. You have collected the following information: The return on risk-free Australian Government Bonds is 2.5% p.a Incarius Ltd has 1,000,000 shares outstanding and its shares are currently trading at $5.50 per share. Beta of Incarius Ltd shares is 1.3, and the expected return on the market is 10.5% Incarius Ltd has 8 million preference shares outstanding at a current price of $11 per share....
Hilton Corporation has 1 million shares of common stock outstanding and 175,000 bonds with 6% coupon at $1000 par each. The stock currently sells at $53 per share and has a beta of 1.15; the bonds have 25 years to maturity and sell at $1141. The market risk premium is 6.8% and Treasury bills are yielding 3.1%. If Hilton’s corporate tax rate is 21%, what is the company’s cost of capital (WACC)?
Johnny Cake Ltd. has 10 million shares of stock outstanding selling at $22 per share and an issue of $50 million in 8 percent annual coupon bonds with a maturity of 18 years, selling at 90.5 percent of par. Assume Johnny Cake’s weighted-average tax rate is 34 percent, its next dividend is expected to be $3 per share, and all future dividends are expected to grow at 4 percent per year, indefinitely. What is its WACC? (Do not round intermediate...
UUSLUTUU Orange Corp has 1 million shares outstanding, and the stock is currently trading at $10 per share. The company has 5000 coupon bonds outstanding. Each coupon bond has a 11% annual coupon, face value of $1000, will mature in 5 years, and is currently priced at 94% of face value. You have decided to calculate the cost of equity using the SML equation. You have estimated that the niska free rate is 5%, and the expected rate of return...
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Saved Dinklage Corp. has 7 million shares of common stock outstanding. The current share price is $73, and the book value per share is $8. The company also has two bond issues outstanding. The first bond issue has a face value of $90 million, a coupon rate of 6 percent, and sells for 98 percent of par. The second issue has a face value of $75 million, a coupon rate of...