Component cost | ||||
after tax cost of debt | (coupon payment/net proceeds)*(1-tax rate) | (100/980)*(1-.38) | 6.33% | |
coupon payment | 1000*10% | 100 | ||
net proceeds | 1000*(1-.02) | 980 | ||
cost of preferred stock | preferred dividend/net proceeds | 10/44.1 | 22.68% | |
preferred dividend | 10 | |||
net proceeds | 45*(1-.02) | 44.1 | ||
cost of common stock | (expected dividend/market price)+growth rate | (3/15)+2% | 22.00% | |
WACC | ||||
source | value | weight | component cost | weight*component cost |
debt | 700000 | 0.518519 | 6.33% | 0.032804 |
preferred stock | 150000 | 0.111111 | 22.68% | 0.025195 |
common stock | 500000 | 0.37037 | 22.00% | 0.081481 |
total | 1350000 | |||
WACC = sum of weight*component cost | 13.95% | |||
minimum acceptable return for the company | WACC+2% | 13.95%+2% | 15.95% |
12. A company sells bonds with a face value of $ 1,000 to make money to...
12. A company sells bonds with a face value of $ 1,000 to make money to invest. He currently has $ 500,000 of dividends withheld from common stock and the sale of preferred stock for a total amount of $ 150,000 is approved. It is expected to receive $ 700,000 of debt with the sale of the bonds. These bonds are 20 years with a coupon interest rate of 10% per year. Sold at par. Also, it is known that...
Suppose ABC 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...
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...
(b) Calculate the WACC for the following firm: Debt: 40,000 bonds with coupon rate of 5% paid annually and face value of $100. The bonds are currently trading for $85 each and have 10 years until maturity. The yield to maturity of the bonds is 7.15% p.a. before tax. Common stock: 150,000 ordinary shares currently trading for $50 per share. The most recent dividend from the stock has been $5 per share and the dividend is expected to grow at...
1) Calculate the WACC for this company. $30,000,000 par value of 20-year bonds issued in 2007 (today is 2018) paying 8% in interest Market rate for similar bonds is 6% 750,000 shares of preferred stock, market price = $30, dividend = $2.50 1,500,000 shares of common stock, market price = $20, dividend next period = $.75, expected growth rate = 10%, risk free rate = 4%, market premium = 12%, Beta = 1.21 Company’s tax rate = 40%
Seven years ago, Qualtric issued 3,750 semi-annual bonds at a par value of $1,000 and a coupon rate of 7.25%. The bonds had an original maturity of 20 years. These bonds are now trading in the open market for $1,075. The company's tax rate is 30% and its most recent dividend was $3.05. The company's dividends have been growing at 2.65% annually and they are expected to continue growing at that same rate. The price of Qualtric, Inc. stock is...
the last question) Debt 20 bonds with 8 % coupon rate. payable annually, $1.000 par value. 15 years to maturity, selling at $970 per bond. 500 shares of common stock outstanding. The stock sells for a price of 5112 per share and has a beta of 1.6 Common Stock Preferred Stock 110 preferred shares outstanding, currently trading at $120 per share: with an annual dividend payment of $7 Market The market risk premium is 9% and the risk free rate...
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...
Question Completion Status: Debt 20 bonds with 8 % coupon rate, payable annually, 51.000 par value, 15 years to maturity, selling at 5970 per bond. 500 shares of common stock outstanding. The stock sells for a price of 5112 per share and has a beta of 1.6 Common Stock Preferred Stock 110 preferred shares outstanding, currently trading at $120 per share with a annual dividend payment of 57 Market The market risk premium is 996 and the risk free rate...
"What is the WACC for the following company? Debt: 15,000 bonds with a par value of $1,000 and a quoted price of 113.25. The bonds have coupon rate of 4.7 percent and 15 years to maturity. 20,000 zero coupon bonds with a par value of $10,000, a quoted price of 30.45, and 28 years to maturity. Common Stock: 1,550,000 shares of stock selling at a market price of $105. The beta for the stock is 1.25. The company just paid...