Question

You are given the following information concerning Parrothead Enterprises: Debt 13,000 6.4 percent coupon bonds outstanding,
0 0
Add a comment Improve this question Transcribed image text
Answer #1

rate positively ..

a Rate of equity =
Using CAPM rate of equity = Risk free rate + market risk premium * beta
=3.6%+(11%-3.6%)*0.9
10.26%
using DDM = 3.8/76.5+5% 9.97%
Average required rate = 10.11%
b Rate of debt (after tax)
we have to use financial calculator to compute YTM
Put in calcualtor
PV -1070
FV 1000
PMT 1000*6.4%/2 32
N 15*2 30
Compute I 2.85%
YTM = 2.85%*2 5.70%
tax rate = 22%
therefore rate of debt (after tax) = 5.7%*(1-22%) 4.45%
rate of debt (after tax) = 4.45%
c rate of preferred stock = Annual dividend/Current price
=4.4/86
5.12%
Working for rest of question
Computation of Weight and WACC
Market value weight Cost of capital weight * cost
Source
equity 26392500 =345000*76.5 64.12% 10.11% 6.48%
debt 13910000 =13000*1000*107% 33.79% 4.45% 1.50%
preferred stock 860000 =10000*86 2.09% 5.12% 0.11%
41162500 8.09%
WACC = 8.09%
Add a comment
Know the answer?
Add Answer to:
You are given the following information concerning Parrothead Enterprises: Debt 13,000 6.4 percent coupon bonds outstanding,...
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
  • You are given the following information concerning Parrothead Enterprises: Debt: 13,000 6.4 percent coupon bonds outstanding,...

    You are given the following information concerning Parrothead Enterprises: Debt: 13,000 6.4 percent coupon bonds outstanding, with 15 years to maturity and a quoted price of 107. These bonds pay interest semiannually. Common stock: 345,000 shares of common stock selling for $76.50 per share. The stock has a beta of.90 and will pay a dividend of $3.80 next year. The dividend is expected to grow by 5 percent per year indefinitely. Preferred stock: 10,000 shares of 4.4 percent preferred stock...

  • rate 17. Calculating the WACC You are given the following information concerning Parrothead Enterprises: LO 3...

    rate 17. Calculating the WACC You are given the following information concerning Parrothead Enterprises: LO 3 Debt: 13,000 6.4 percent coupon bonds outstanding, with 15 years to maturity and a quoted price of 107. These bonds pay interest semiannually. Common stock: 345,000 shares of common stock selling for $76.50 per share. The stock has a beta of 90 and will pay a dividend of $3.80 next year. The dividend is expected to grow by 5 percent per year indefinitely. 10,000...

  • You are given the following information concerning Parrothead Enterprises: Debt: 10,100 7.1 percent coupon bonds outstanding,...

    You are given the following information concerning Parrothead Enterprises: Debt: 10,100 7.1 percent coupon bonds outstanding, with 24 years to maturity and a quoted price of 106.75. These bonds pay interest semiannually. Common stock: 280,000 shares of common stock selling for $65.60 per share. The stock has a beta of .96 and will pay a dividend of $3.80 next year. The dividend is expected to grow by 5.1 percent per year indefinitely. Preferred stock: 9,100 shares of 4.55 percent preferred...

  • You are given the following information on Parrothead Enterprises: Debt: 9,200 6.4 percent coupon bonds outstanding,...

    You are given the following information on Parrothead Enterprises: Debt: 9,200 6.4 percent coupon bonds outstanding, with 23 years to maturity and a quoted price of 104.5. These bonds pay interest semiannually and have a par value of $1,000. Common stock: 235,000 shares of common stock selling for $64.70 per share. The stock has a beta of .92 and will pay a dividend of $2.90 next year. The dividend is expected to grow by 5.2 percent per year indefinitely. Preferred...

  • You are given the following information on Parrothead Enterprises: Debt: 9,200 6.4 percent coupon bonds outstanding,...

    You are given the following information on Parrothead Enterprises: Debt: 9,200 6.4 percent coupon bonds outstanding, with 23 years to maturity and a quoted price of 104.5. These bonds pay interest semiannually and have a par value of $1,000. Common stock: 235,000 shares of common stock selling for $64.70 per share. The stock has a beta of .92 and will pay a dividend of $2.90 next year. The dividend is expected to grow by 5.2 percent per year indefinitely. Preferred...

  • tal were used as a hurdle rate? 17. Calculating the WACC You are given the following...

    tal were used as a hurdle rate? 17. Calculating the WACC You are given the following information concerning Parrothead Enterprises: Debt: 13,000 6.4 percent coupon bonds outstanding, with 15 years to maturity and a quoted price of 107. These bonds pay interest semiannually. Common stock: 345,000 shares of common stock selling for $76.50 per share. The stock has a beta of .90 and will pay a dividend of $3.80 next year. The dividend is expected to grow by 5 percent...

  • You are given the following information on Parrothead Enterprises: Debt: 9,400 6.6 percent coupon bonds outstanding,...

    You are given the following information on Parrothead Enterprises: Debt: 9,400 6.6 percent coupon bonds outstanding, with 21 years to maturity and a quoted price of 105. These bonds pay interest semiannually and have a par value of $1,000. Common stock: 245,000 shares of common stock selling for $64.90 per share. The stock has a beta of .94 and will pay a dividend of $3.10 next year. The dividend is expected to grow by 5.4 percent per year indefinitely. Preferred...

  • You are given the following information on Parrothead Enterprises: Debt: 9,300 7.4 percent coupon bonds outstanding,...

    You are given the following information on Parrothead Enterprises: Debt: 9,300 7.4 percent coupon bonds outstanding, with 21 years to maturity and a quoted price of 108.75. These bonds pay interest semiannually and have a par value of $2,000. Common stock: 320,000 shares of common stock selling for $66.40 per share. The stock has a beta of 1.09 and will pay a dividend of $4.60 next year. The dividend is expected to grow by 5.4 percent per year indefinitely. Preferred...

  • You are given the following information on Parrothead Enterprises: Debt: 9,300 6.5 percent coupon bonds outstanding,...

    You are given the following information on Parrothead Enterprises: Debt: 9,300 6.5 percent coupon bonds outstanding, with 22 years to maturity and a quoted price of 104.75. These bonds pay interest semiannually and have a par value of $1.000. Common stock: 240,000 shares of common stock selling for $64.80 per share. The stock has a beta of.93 and will pay a dividend of $3.00 next year. The dividend is expected to grow by 5.3 percent per year indefinitely. Preferred stock:...

  • You are given the following information on Parrothead Enterprises: Debt: 8,800 7.4 percent coupon bonds outstanding,...

    You are given the following information on Parrothead Enterprises: Debt: 8,800 7.4 percent coupon bonds outstanding, with 21 years to maturity and a quoted price of 107.5. These bonds pay interest semiannually and have a par value of $2,000. Common stock: 295,000 shares of common stock selling for $65.90 per share. The stock has a beta of 1.04 and will pay a dividend of $4.10 next year. The dividend is expected to grow by 5.4 percent per year indefinitely. Preferred...

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