Question

Suppose that B2B, Inc. has a capital structure of 37 percent equity, 18 percent preferred stock, and 45 percent debt. Assume

0 0
Add a comment Improve this question Transcribed image text
Answer #1

After-tax cost of debt=9.5*(1-tax rate)

=9.5*(1-0.3)=6.65%

WACC=Respective costs*Respective weight

=(0.37*14.5)+(0.18*11)+(0.45*6.65)

=10.34%(Approx).

Add a comment
Know the answer?
Add Answer to:
Suppose that B2B, Inc. has a capital structure of 37 percent equity, 18 percent preferred stock,...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
  • Suppose that B2B, Inc. has a capital structure of 38 percent equity, 15 percent preferred stock,...

    Suppose that B2B, Inc. has a capital structure of 38 percent equity, 15 percent preferred stock, and 47 percent debt. Assume the before-tax component costs of equity, preferred stock, and debt are 14.5 percent, 110 percent, and 9.5 percent, respectively, What is B2B's WACC If the firm faces an average tax rate of 21 percent and can make full use of the interest tax shield? (Round your answer to 2 decimal places.) WACC 1028 %

  • Suppose that JB Cos. has a capital structure of 80 percent equity, 20 percent debt, and...

    Suppose that JB Cos. has a capital structure of 80 percent equity, 20 percent debt, and that its before-tax cost of debt is 14 percemt while its cost of equity is 18 percent. Assume the appropriate weighted-average tax rate is 21 percent and JB estimates that they can make full use of the interest tax shield. What will be JB's WACC? (Round your answer to 2 decimal places.) WACC % Suppose that B2B, Inc. has a capital structure of 35...

  • Suppose that MNINK Industries' capital structure features 63 percent equity, 8 percent preferred stock, and 29...

    Suppose that MNINK Industries' capital structure features 63 percent equity, 8 percent preferred stock, and 29 percent debt. Assume the before-tax component costs of equity, preferred stock, and debt are 11.70 percent, 9.60 percent, and 9.00 percent, respectively. What is MNINK's WACC if the firm faces an average tax rate of 34 percent? (Round your answer to 2 decimal places.) WACC

  • Suppose that MNINK industries capital structure features 63 percent equity 7 percent preferred stock and 30...

    Suppose that MNINK industries capital structure features 63 percent equity 7 percent preferred stock and 30 percent debt. Assume the before tax component cost of equity preferred stock and debt are 11.80 percent and 9.00 percent respectively. What is MNINKs WACC of the firm faces an average tax rate of 21 percent and can make full use of the interest tax shield?

  • 1. Suppose that TapDance, Inc.’s, capital structure features 65 percent equity, 35 percent debt, and that...

    1. Suppose that TapDance, Inc.’s, capital structure features 65 percent equity, 35 percent debt, and that its before-tax cost of debt is 7 percent, while its cost of equity is 12 percent. Assume the appropriate weighted average tax rate is 34 percent. What will be TapDance’s WACC? (Round your answer to 2 decimal places.) 2. Suppose that MNINK Industries’ capital structure features 63 percent equity, 7 percent preferred stock, and 30 percent debt. Assume the before-tax component costs of equity,...

  • 11-17, WACC. please show formula using Excel 11-15 WACC Suppose lidl Tup 35 percent debt, and...

    11-17, WACC. please show formula using Excel 11-15 WACC Suppose lidl Tup 35 percent debt, and that its before-tax cost of UED 10 equity is 13 percent. If the appropriate weighted average tax rate is 34 percent will be TapDance's WACC? (LG11-2) 11-16 WACC Suppose that JB Cos, has a capital structure of 78 percent equity, 22 percent debt, and that its before-tax cost of debt is 11 percent while its cost of equity is 15 percent. If the appropriate...

  • WACC Suppose that Ferry Landings, Inc., Inc. has a capital structure of 40% common equity, 15%...

    WACC Suppose that Ferry Landings, Inc., Inc. has a capital structure of 40% common equity, 15% preferred stock, and 45% debt. If the before-tax component costs of common equity, preferred stock and debt are 15%, 10% and 8%, respectively. What is Ferry Landings, Inc.’s WACC if the firm faces an average tax rate of 30 percent? Using the WACC equation: WACC = E/(E+P+D) x RE + P/(E+P+D) x RP + D/(E+P+D) x RD Where; E = Market value of common...

  • Suppose that TapDance, Inc.’s capital structure features 75 percent equity, 25 percent debt, and that its...

    Suppose that TapDance, Inc.’s capital structure features 75 percent equity, 25 percent debt, and that its before-tax cost of debt is 8 percent, while its cost of equity is 13 percent. The appropriate weighted average tax rate is 21 percent. What will be TapDance’s WACC? (Round your answer to 2 decimal places.) Suppose that TapDance, Inc.'s capital structure features 75 percent equity, 25 percent debt, and that its before-tax cost of debt is 8 percent, while its cost of equity...

  • Turnbull Co. has a target capital structure of 45% debt, 4% preferred stock, and 51% common...

    Turnbull Co. has a target capital structure of 45% debt, 4% preferred stock, and 51% common equity. It has a before-tax cost of debt of 8.2%, and its cost of preferred stock is 9.3%. If Turnbull can raise all of its equity capital from retained earnings, its cost of common equity will be 12.4%. However, if it is necessary to raise new common equity, it will carry a cost of 14.2%. If its current tax rate is 40%, how much...

  • Given the following information: Percent of capital structure: 20% Preferred stock Common equity Debt Additional information:...

    Given the following information: Percent of capital structure: 20% Preferred stock Common equity Debt Additional information: Corporate tax rate Dividend, preferred Dividend, expected common Price, preferred Growth rate Bond yield Flotation cost, preferred Price, common 34% $ 8.50 $ 2.50 $ 105.00 7% 9.5% $ 3.60 $ 75.00 Calculate the weighted average cost of capital for Digital Processing Inc. (Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places.) Weighted Cost Debt Preferred stock...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT