ZuoTi.Pro
Question

McCann Catching, Inc. has 2.00 million shares of stock outstanding. The stock currently sells for $12.75...

McCann Catching, Inc. has 2.00 million shares of stock outstanding. The stock currently sells for $12.75 per share. The firm’s debt is publicly traded and was recently quoted at 88.00% of face value. It has a total face value of $11.00 million, and it is currently priced to yield 9.00%. The risk free rate is 4.00% and the market risk premium is 8.00%. You’ve estimated that the firm has a beta of 1.20. The corporate tax rate is 36.00%.

The firm is considering a $41.97 million expansion of their production facility. The project has the same risk as the firm overall and will earn $10.00 million per year for 6.00 years.

What is the WACC for McCann Catching, Inc.?

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

cost of equity=4.00%+1.20*8.00%=13.60%

value of equity=2*12.75=25.50 million

value of debt=11.00*88.00%=9.68 million

WACC=(9.68/(9.68+25.50))*9.00%*(1-36.00%)+(25.50/(9.68+25.50))*13.60%

=11.44%

the above is answer..

0 0
Add a comment
Know the answer?
Add Answer to:
McCann Catching, Inc. has 2.00 million shares of stock outstanding. The stock currently sells for $12.75...
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

  • McCann Catching, Inc. has 2.00 million shares of stock outstanding. The stock currently sells for $12.62...

    McCann Catching, Inc. has 2.00 million shares of stock outstanding. The stock currently sells for $12.62 per share. The firm’s debt is publicly traded and was recently quoted at 90.00% of face value. It has a total face value of $10.00 million, and it is currently priced to yield 10.00%. The risk free rate is 4.00% and the market risk premium is 8.00%. You’ve estimated that the firm has a beta of 1.17. The corporate tax rate is 38.00%. The...

  • McCann Catching, Inc. has 2.00 million shares of stock outstanding. The stock currently sells for $12.87...

    McCann Catching, Inc. has 2.00 million shares of stock outstanding. The stock currently sells for $12.87 per share. The firm’s debt is publicly traded and was recently quoted at 89.00% of face value. It has a total face value of $16.00 million, and it is currently priced to yield 10.00%. The risk free rate is 4.00% and the market risk premium is 8.00%. You’ve estimated that the firm has a beta of 1.49. The corporate tax rate is 38.00%. The...

  • McCann Catching, Inc. has 2.00 million shares of stock outstanding. The stock currently sells for $12.98...

    McCann Catching, Inc. has 2.00 million shares of stock outstanding. The stock currently sells for $12.98 per share. The firm's debt is publicly traded and was recently quoted at 89.00% of face value. It has a total face value of $16.00 million, and it is currently priced to yield 8.00%. The risk free rate is 2.00% and the market risk premium is 8.00%. You've estimated that the firm has a beta of 1.18. The corporate tax rate is 38.00%. The...

  • **THIS QUESTION HAS 4 PARTS TOTAL** 1. What is the cost of equity? 2. What is...

    **THIS QUESTION HAS 4 PARTS TOTAL** 1. What is the cost of equity? 2. What is the percentage of equity used by McCann Catching, Inc.? 3. What is the WACC for McCann Catching, Inc.? 4. What is the NPV of the expansion? (answer in terms of millions, so 1,000,000 would be 1.0000) McCann Catching, Inc. has 2.00 million shares of stock outstanding. The stock currently sells for $12.90 per share. The firm's debt is publicly traded and was recently quoted...

  • Ramblin Wreck is a firm specializing in engineering components. The firm is publicly traded and is...

    Ramblin Wreck is a firm specializing in engineering components. The firm is publicly traded and is considering the following project: The project will last 5.00 years with an annual cash flow of $40.00 million. The project will require an initial investment of $140.00 million The firm must determine the cost of capital to evaluate the project. (The project is within the firm’s normal activities) Ramblin Wreck, Inc. Financial Data: STOCK DATA: BOND DATA: Current Price Per Share $29.00 Current Price...

  • Question 2 Orange Corp has 1 million shares outstanding, and the stock is currently trading at...

    Question 2 Orange Corp has 1 million shares outstanding, and the stock is currently trading at $10 per share. The company has two different bonds outstanding. First, it has 5000 zero coupon bonds outstanding. Each zero coupon bond has a face value of $1000, will mature in 5 years, and is currently priced at 65% of face value. Second, the company has 5000 coupon paying bonds outstanding. Each coupon paying bond is currently priced at $940.00, and the YTM is...

  • Question 2 Orange Corp has 1 million shares outstanding, and the stock is currently trading at...

    Question 2 Orange Corp has 1 million shares outstanding, and the stock is currently trading at $10 per share. The company has two different bonds outstanding. First, it has 5000 zero coupon bonds outstanding. Each zero coupon bond has a face value of $1000, will mature in 5 years, and is currently priced at 65% of face value. Second, the company has 5000 coupon paying bonds outstanding. Each coupon paying bond is currently priced at $940.00, and the YTM is...

  • A Toys Company has 1.6 million shares in issue. The current market price is $35 per...

    A Toys Company has 1.6 million shares in issue. The current market price is $35 per share. The company’s debt is publicly traded on the London Stock Exchange and the most recent quote for its price was at 96% of face value. The debt has a total face value of $ 8 million and the company’s credit risk premium is currently 2.9%. The risk-free rate is 3.4% and the equity market risk premium is 7%. The company’s beta is estimated...

  • UUSLUTUU Orange Corp has 1 million shares outstanding, and the stock is currently trading at $10...

    UUSLUTUU Orange Corp has 1 million shares outstanding, and the stock is currently trading at $10 per share. The company has 5000 coupon bonds outstanding. Each coupon bond has a 11% annual coupon, face value of $1000, will mature in 5 years, and is currently priced at 94% of face value. You have decided to calculate the cost of equity using the SML equation. You have estimated that the niska free rate is 5%, and the expected rate of return...

  • 1. Organic Produce Corporation has 7.5 million shares of common stock outstanding, 500,000 shares of 7%...

    1. Organic Produce Corporation has 7.5 million shares of common stock outstanding, 500,000 shares of 7% preferred stock outstanding, and 175,000 of 8.2% semiannual bonds outstanding, par value of $1,000 each. The common stock currently sells for $64 per share and has a beta of 1.2, the preferred stock currently sells for $108 per share, and the bonds have 15 years to maturity and sell for 96% of par. The market risk premium is 6.8%, T-Bills are yielding 5.5%, and...

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