ZuoTi.Pro
Question

You are given the following information for Golden Fleece Financial: Long-term debt outstanding Current yield to maturity (rdeb): Number of shares of common stock Price per share: Book value per share: Expected rate of return on stock (equity $330,000 796 11,500 $50.30 $28 14% Calculate Golden Fleeces company cost of capital. Ignore taxes. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Cost of capital
business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

The total market value of outstanding debt is $330,000. The cost of debt capital is 7%. For the common stock, the outstanding market value is:

$50.30 × 11,500 = $578,450. The cost of equity capital is 14%. Thus, Golden Fleece’s company cost of capital is:

rassets = [($330,000 / ($330,000 + $578,450)) × 0.07] + [($578,450 / ($330,000 + $578,450)) × 0.14]

rassets = 0.1146 or 11.46%

0 0
Add a comment
Know the answer?
Add Answer to:
You are given the following information for Golden Fleece Financial: Long-term debt outstanding Current yield to...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

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 for Golden Fleece Financial: Long-term debt outstanding: Current yield to...

    You are given the following information for Golden Fleece Financial: Long-term debt outstanding: Current yield to maturity (rdebt): $360,000 9 % Number of shares of common stock: Price per share: Book value per share: Expected rate of return on stock (requity): 13,000 $ 50.60 31 16% Calculate Golden Fleece's company cost of capital. Ignore taxes. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Cost of capital %

  • You are given the following information for Golden Fleece Financial: $400,000 Long-term debt outstanding: Current yield...

    You are given the following information for Golden Fleece Financial: $400,000 Long-term debt outstanding: Current yield to maturity (rdebt): Number of shares of common stock: Price per share: Book value per share: Expected rate of return on stock (requity): 15,000 $ 50.00 $ 35 15% Calculate Golden Fleece's company cost of capital. Ignore taxes. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Cost of capital

  • Consider the following information for Federated Junkyards of America. Debt: $77,000,000 book value outstanding. The debt...

    Consider the following information for Federated Junkyards of America. Debt: $77,000,000 book value outstanding. The debt is trading at 92% of book value. The yield to maturity is 11%. Equity: 2,700,000 shares selling at $44 per share. Assume the expected rate of return on Federated’s stock is 20%. 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: Debt: $69,000,000 book value outstanding. The debt is trading at 95% of book value. The yield to maturity is 10%. Equity: 1,900,000 shares selling at $36 per share. Ass...

    Use the following information: Debt: $69,000,000 book value outstanding. The debt is trading at 95% of book value. The yield to maturity is 10%. Equity: 1,900,000 shares selling at $36 per share. Assume the expected rate of return on Federated’s stock is 19%. Taxes: Federated’s marginal tax rate is Tc = .35. Suppose Federated Junkyards decides to move to a more conservative debt policy. A year later its debt ratio is down to 16.50% (D/V = .165). The interest rate...

  • Check my work Consider the following information for Federated Junkyards of America. 10 points • Debt:...

    Check my work Consider the following information for Federated Junkyards of America. 10 points • Debt: $79,000,000 book value outstanding. The debt is trading at 94% of book value. The yield to maturity is 7%. • Equity: 2,900,000 shares selling at $46 per share. Assume the expected rate of return on Federated's stock is 16%. • Taxes: Federated's marginal tax rate is Tc = 0.21. eBook Print Calculate the weighted average cost of capital (WACC). (Do not round intermediate calculations....

  • The Rivoli Company has no debt outstanding, and its financial position is given by the following...

    The Rivoli Company has no debt outstanding, and its financial position is given by the following data: Expected EBIT = $600,000 Growth rate in EBIT gL = 0% Cost of equity, rs = 10% Shares outstanding, n0 = 200,000 Tax rate, T (federal-plus-state) = 25% a. What is Rivoli’s intrinsic value of operations (i.e., its unlevered value)? What is its intrinsic stock price? Its earnings per share? b. Rivoli is considering selling bonds and simultaneously repurchasing some of its stock....

  • You are given the following information about a company: There are 1000 shares of stock outstanding...

    You are given the following information about a company: There are 1000 shares of stock outstanding and the price is $7 per share There are 5 bonds outstanding. Each has a face value of $1000, has 5 years to maturity, and pays a 6% coupon semi-annually The yield to maturity on the bond is 5%. The corporate tax rate is 30% The Beta on the stock is 1.1, the risk-free rate is 2%, and the return on the market is...

  • Calculating Weighted-Average Cost of Capital (WACC)

    Consider the following information for Federated Junkyards of America.Debt: $75,000,000 book value outstanding. The debt is trading at 90% of book value. The yield to maturity is 9%.Equity: 2,500,000 shares selling at $42 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). (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)Step-by-step, please!

  • Gunnar Corp. uses no debt. The weighted average cost of capital is 8.1 percent. The current...

    Gunnar Corp. uses no debt. The weighted average cost of capital is 8.1 percent. The current market value of the equity is $40 million and the corporate tax rate is 22 percent. What is the EBIT? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.) EBIT Kolby Corp. is comparing two different capital structures. Plan I would result in 9,000 shares of stock and $80,000 in debt....

  • XYZ Co. has the following financial information: Debt: 25,000 bonds outstanding with a face value of...

    XYZ Co. has the following financial information: Debt: 25,000 bonds outstanding with a face value of $1,000. The bonds currently trade at 91% of par and have 10 years to maturity. The coupon rate equals 3%, and the bonds make semi-annual interest payments. Preferred stock: 300,000 shares of preferred stock outstanding; currently trading for $153 per share and it pays a dividend of $6.40 per share every year. Common stock: 1,000,000 shares of common stock outstanding; currently trading for $85...

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