Finance Question
Your task is to find the cost of capital (WACC) for a company. The company has two sources of capital available. The marginal tax rate for the company is 35%.
Debt 1: The company has issued 1 000 coupon bonds with par value of 10 000 euros. These bonds carry 4% coupon rate but currently offer 5% yield to investors. The market value of bonds is 9 500 euros per bond.
Debt 2: The company has also recently obtained secured financing from the bank. The current loan balance is 4.5 million euros and the annual interest charged by bank is 3.5%.
Common stock: the company has 150 000 shares outstanding with current market value equal to 40 euros. You may assume, that the current risk free interest rate is 1.5% and the company’s beta is equal to 1.40. The markets are expected to provide 12% (e.g. Rm) a year in the near future.
Questions:
a) Estimate the capital structure weights for each source and required rate of return for each source when necessary.
b) Find the cost of capital (WACC) for the company
c) Please describe shortly how possible increase in the cost of capital could influence a company
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Your task is to find the cost of capital (WACC) for a company . The company has...
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My question is Q 12 , book value vs market value , thank you
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TUE 95 percent of its face Ulte is 15 percent a. What is the pretax cost of debt? b. What is the aftertax cost of debt? c. Which is more relevant, the pretax or the aftermax cost of debt? Why? Calculating Cost of Debt O2 For the firm in Problem 7. suppose the book value of the debt issue is $85 million. In addition, the...
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Der Fliegende Deckel AG (Aktiengesellschaft, an express dog food delivery service based in Frankfurt an der Oder, is considering changing its capital structure. Its current capital structure is as follows: It has 2,000 5% annual coupon 10 year bonds outstanding which currently trade at 85. The book value for these bonds is $2.0 million. Its common stock sells at $20 per share with 200,000 shares issued and outstanding. Its par value is $5.00 per share and 400,000 shares...
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Problem 11 is the first question*** Thank you
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My question is Q 9, calculating WACC , thank you!
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