ABC Inc. desires to maintain a capital structure of 80% equity and 20% debt. They currently...
Question 35 3 pts Currently, Bloom Flowers Inc. has a capital structure consisting of 20% debt and 80% equity. Bloom's debt currently has an 3.2% yield to maturity. The risk- free rate (FRF) is 3.6%, and the market risk premium (rm-rRF) įs 7.3%. Using the CAPM, Bloom estimates that its cost of equity is currently 12.7%. The company has a 24% tax rate. Bloom's financial staff is considering changing its capital structure to 40% debt and 60% equity. If the...
Currently, Forever Flowers Inc. has a capital structure consisting of 20% debt and 80% equity. Forever's debt currently has an 8% yield to maturity. The risk-free rate (rRF) is 5%, and the market risk premium (rM - rRF) is 4%. Using the CAPM, Forever estimates that its cost of equity is currently 14.5%. The company has a 40% tax rate. Forever's financial staff is considering changing its capital structure to 40% debt and 60% equity. If the company went ahead...
Currently, Forever Flowers Inc. has a capital structure consisting of 20% debt and 80% equity. Forever's debt currently has an 7% yield to maturity. The risk-free rate( 6%, and the market risk premium (IM - TRF) is 7%. Using the CAPM, Forever estimates that its cost of equity is currently 13%. The company has a 25% tax rate. a. What is Forever's current WACC? Round your answer to two decimal places. ) is b. What is the current beta on...
ABC company currently has an all equity capital structure. ABC has an expected operating income (EBIT) of $12,000. Assume that this EBIT figure is perpetual, that is to say, EBIT will continue at this same level forever. Its cost of equity (which is also its WACC since there is no debt financing currently) is 11.3 percent. ABC company has plans to issue $32,500 in debt at a cost of 5.4 percent in order to buy back a same amount of...
Currently, Bloom Flowers Inc. has a capital structure consisting of 20% debt and 80% equity. Bloom’s debt currently has an 8% yield to maturity. The risk-free rate (rRF) is 5%, and the market risk premium (rM – rRF) is 6%. Using the CAPM, Bloom estimates that its cost of equity is currently 12.5%. The company has a 40% tax rate. A. What is Bloom’s current WACC? B. What is the current beta on Bloom’s common stock? C. What would Bloom’s...
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...
ABC Inc.'s capital structure includes only common equity and debt (i.e. no preferred equity). The company's outstanding debt has a market value of $1.5 billion and a pre-tax cost of debt of 10%. In addition, its common stocks are valued at $4.5 billion by the market and the current stock price is $10. The company expects to pay $1.08 dividends per share in the next period and dividends are assumed to grow at a constant rate of 5 indefinitely. Assuming...
Cameron Corp. has a target capital structure of 40% debt and 60% equity. The company's tax rate is 30% and the yield to maturity on their outstanding bonds is 12%. If their weighted average cost of capital is 9.6%, what is the company's cost of common equity? (If taxes are a negative number then they will be refunded by the IRS, creating a positive cash flow.) Multiple Choice 0 5.8% 0 9.3% 0 10.4% 0 13.6%
Currently, Forever Flowers Inc. has a capital structure consisting of 25% debt and 75% equity. Forever's debt currently has an 8% yield to maturity. The risk-free rate (rRF) is 6%, and the market risk premium (rM - rRF) is 7%. Using the CAPM, Forever estimates that its cost of equity is currently 11.5%. The company has a 40% tax rate. Forever's financial staff is considering changing its capital structure to 40% debt and 60% equity. If the company went ahead...
Currently, Forever Flowers Inc. has a capital structure consisting of 35% debt and 65% equity. Forever's debt currently has an 8% yield to maturity. The risk-free rate (rRF) is 5%, and the market risk premium (rM - rRF) is 6%. Using the CAPM, Forever estimates that its cost of equity is currently 14%. The company has a 25% tax rate. What is Forever's current WACC? Round your answer to two decimal places. % What is the current beta on Forever's...