Internal and External Capital cost
Given the following information, calculate the weighted average cost of capital for Puppet Corporation. (Round intermediate calculations to 2 decimal places. Round the final answers to 2 decimal places.)
| Percent of capital structure: | |||
| Debt | 45% | ||
| Preferred stock | 30 | ||
| Common equity | 25 | ||
| Additional information: | |||
| Bond coupon rate | 8.5% | ||
| Bond yield | 7.75% | ||
| Bond flotation cost | 2% | ||
| Dividend, expected common | $1.50 | ||
| Price, common | $30.00 | ||
| Dividend, preferred | 6% | ||
| Flotation cost, preferred | 3% | ||
| Flotation cost, common | 4.00% | ||
| Corporate growth rate | 6% | ||
| Corporate tax rate | 35% | ||
a. Calculate the cost of capital assuming use of internally generated funds.
Internal capital cost %
b. Calculate the cost of capital assuming use of externally generated funds.
External capital cost %
Homework Answers
| a. Calculation of the cost of capital assuming use of internally generated funds | |||
| Cost of Debt | |||
| YTM | 7.75% | ||
| Afer Tax cpst of Debt | 7.75% (1-35%) | 5.04% | |
| Cost of Debt adjusted for flotation | 5.04%(1-2%) | 4.94% | |
| Cost of Preferred Stock | |||
| Yield | 6% | ||
| Adjusted for flatation | 6%(1-3%) | 5.82% | |
| Cost Of common Stock | |||
| Yield | (1.5/30)+6% | 11.00% | |
| Debt | 45 | 4.94% | |
| Preferred Stock | 30 | 5.82% | |
| Common Stock | 25 | 11.00% | |
| WACC | 6.72% | ||
| b.cost of capital assuming use of externally generated funds | |||
| YTM | 7.75% | ||
| Afer Tax cpst of Debt | 7.75% (1-35%) | 5.04% | |
| Cost of Debt adjusted for flotation | 5.04%(1-2%) | 4.94% | |
| Cost of Preferred Stock | |||
| Yield | 6% | ||
| Adjusted for flatation | 6%(1-3%) | 5.82% | |
| Cost Of common Stock(External earning) | |||
| Cost of retained earnings/(1-flotation cost) | 11%/(1-4%) | 11.46% | |
| Debt | 45 | 4.94% | |
| Preferred Stock | 30 | 5.82% | |
| Common Stock | 25 | 11.46% | |
| WACC | 6.83% | ||
Given the following information, calculate the weighted average cost of capital for Puppet Corporation. (Round intermediate...
Given the following information, calculate the weighted average cost of capital for Puppet Corporation. (Round intermediate calculations to 2 decimal places. Round the final answers to 2 decimal places.) Percent of capital structure: Debt 50% Preferred stock 20 Common equity 30 Additional information: Bond coupon rate 8.5% Bond yield 7.25% Bond flotation cost 2% Dividend, expected common $2.00 Price, common $32.00 Dividend, preferred 6% Flotation cost, preferred 3% Flotation cost, common 4.50% Corporate growth rate 7% Corporate tax...
$3.20 $70.00 26. Gi ven the following information, calculate the weighted average cost of capital for Puppet Corp...
$3.20 $70.00 26. Gi ven the following information, calculate the weighted average cost of capital for Puppet Corporation. Percent of Capital Structure 55% 40 Additional Information: 8.5% 7% 2% $1.50 $30.00 Dividend, preferred 5% 3% 4% 6% Corporate tax rate . Part 4: The Capital Budgeting Process a. Calculate the cost of capital assuming use of internally generated funds. b. Calculate the cost of capital assuming use of externally generated funds Why is there a difference? Why does only common...
Weighted average cost of capital
Given the following information. Percent of capital structure:Debt30%Preferred stock30Common equity40Additional information:Corporate tax rate34%Dividend, preferred$5.00Dividend, expected common$1.50Price, preferred$96.00Corporate growth rate4%Bond yield11%Flotation cost, preferred$9.50Price, common$82.00 Calculate the weighted average cost of capital for Johnson Corporation. Line up the calculations in the order shown in Table 11–1. (Round intermediate calculations to 2 decimal places. Round the final answers to 2 decimal places.) Weighted Cost Debt (Kd) % Preferred stock (Kp) Common equity (Ke) Weighted average cost of capital (Ka) %
Given the following information: Percent of capital structure: points Debt Preferred stock Common equity 30% 15...
Given the following information: Percent of capital structure: points Debt Preferred stock Common equity 30% 15 eBook Additional information: Hint Bond coupon rate Bond yield to maturity Dividend, expected common Dividend, preferred Price, common Price, preferred Flotation cost, preferred Growth rate Corporate tax rate 10% 8% $ 4.00 $ 11.00 $ 55.00 $ 104.00 $ 5.50 Print 7% References 30% Calculate the Hamilton Corp.'s weighted cost of each source of capital and the weighted average cost of capital. (Do not...
Given the following information: Percent of capital structure: Debt 15% Preferred stock Common equity (retained earnings)...
Given the following information: Percent of capital structure: Debt 15% Preferred stock Common equity (retained earnings) 10 75 Additional information: Bond coupon rate Bond yield to maturity Dividend, expected common Dividend, preferred Price, common Price, preferred Flotation cost, preferred Growth rate Corporate tax rate 5% 4% $ 2.00 $ 9.00 $ 45.00 $130.00 %$4 2.20 7% 35% Calculate the Hamilton Corp's weighted cost of each source of capital and the weighted average cost of capital. (Do not round intermediate calculations....
Given the following information. Percent of capital structure: Debt 20 % Preferred stock 30 Common equity...
Given the following information. Percent of capital structure: Debt 20 % Preferred stock 30 Common equity 50 Additional information: Corporate tax rate 40 % Dividend, preferred $8.00 Dividend, expected common $3.50 Price, preferred $103.00 Corporate growth rate 8 % Bond yield 9 % Flotation cost, preferred $7.20 Price, common $78.00 Calculate the weighted average cost of capital for Hadley Corporation. Line up the calculations in the order shown in Table 11–1. (Round intermediate calculations to 2 decimal places. Round the...
Valvano Publishing Company is trying to calculate its cost of capital for use in a capital...
Valvano Publishing Company is trying to calculate its cost of capital for use in a capital budgeting decision. Mr. Washburn, the vice-president of finance, has given you the following information and asked you to compute the weighted average cost of capital. The company currently has outstanding a bond with an 8.5 percent coupon rate and a convertible bond with a 5.4 percent rate. The firm has been informed by its investment dealer, Dean, Smith, and Company, that bonds of equal...
Given the following information. 3ex Percent of capital structure: Debt Preferred stock Common equity Additional information:...
Given the following information. 3ex Percent of capital structure: Debt Preferred stock Common equity Additional information: Bond coupon rate Bond yield Dividend, expected common Dividend, preferred Price, common Price, preferred Flotation cost, preferred Corporate growth rate Corporate tax rate 16% 14% $7.00 $14.00 $70.00 $124.00 $5.80 10% 35% Calculate the weighted average cost of capital for Genex Corporation. Line up the calculations in the order round your intermediate calculations and round your final answers to 2 decimal places.) Weighted Cost...
Given the following information. Percent of capital structure: Debt 10 % Preferred stock 5 Common equity 85 Additional i...
Given the following information. Percent of capital structure: Debt 10 % Preferred stock 5 Common equity 85 Additional information: Bond coupon rate 13 % Bond yield 11 % Dividend, expected common $7.00 Dividend, preferred $14.00 Price, common $70.00 Price, preferred $110.00 Flotation cost, preferred $2.50 Corporate growth rate 4 % Corporate tax rate 30 % Calculate the weighted average cost of capital for Genex Corporation. Line up the calculations in the order shown in Table 11-1. (Do not round your...
Percent of capital structure: Debt 30 % Preferred stock 15 Common equity 55 Additional information: Bond...
Percent of capital structure: Debt 30 % Preferred stock 15 Common equity 55 Additional information: Bond coupon rate 10 % Bond yield 8 % Dividend, expected common $4.00 Dividend, preferred $11.00 Price, common $55.00 Price, preferred $118.00 Flotation cost, preferred $2.80 Corporate growth rate 7 % Corporate tax rate 35 % Calculate the weighted average cost of capital for Genex Corporation. Line up the calculations in the order shown in Table 11-1.
$3.20 $70.00 26. Gi ven the following information, calculate the weighted average cost of capital for Puppet Corporation. Percent of Capital Structure 55% 40 Additional Information: 8.5% 7% 2% $1.50 $30.00 Dividend, preferred 5% 3% 4% 6% Corporate tax rate . Part 4: The Capital Budgeting Process a. Calculate the cost of capital assuming use of internally generated funds. b. Calculate the cost of capital assuming use of externally generated funds Why is there a difference? Why does only common...
Given the following information: Percent of capital structure: points Debt Preferred stock Common equity 30% 15 eBook Additional information: Hint Bond coupon rate Bond yield to maturity Dividend, expected common Dividend, preferred Price, common Price, preferred Flotation cost, preferred Growth rate Corporate tax rate 10% 8% $ 4.00 $ 11.00 $ 55.00 $ 104.00 $ 5.50 Print 7% References 30% Calculate the Hamilton Corp.'s weighted cost of each source of capital and the weighted average cost of capital. (Do not...
Given the following information: Percent of capital structure: Debt 15% Preferred stock Common equity (retained earnings) 10 75 Additional information: Bond coupon rate Bond yield to maturity Dividend, expected common Dividend, preferred Price, common Price, preferred Flotation cost, preferred Growth rate Corporate tax rate 5% 4% $ 2.00 $ 9.00 $ 45.00 $130.00 %$4 2.20 7% 35% Calculate the Hamilton Corp's weighted cost of each source of capital and the weighted average cost of capital. (Do not round intermediate calculations....
Given the following information. 3ex Percent of capital structure: Debt Preferred stock Common equity Additional information: Bond coupon rate Bond yield Dividend, expected common Dividend, preferred Price, common Price, preferred Flotation cost, preferred Corporate growth rate Corporate tax rate 16% 14% $7.00 $14.00 $70.00 $124.00 $5.80 10% 35% Calculate the weighted average cost of capital for Genex Corporation. Line up the calculations in the order round your intermediate calculations and round your final answers to 2 decimal places.) Weighted Cost...
Most questions answered within 3 hours.
-
Suppose we have a binomial experiment in which success is
defined to be a particular quality...
asked 14 minutes ago -
march the type of cellular control with the description: enzyme
induction and the enzyme repression. How...
asked 23 minutes ago -
Brief Exercise 5-09 (Part Level Submission)
The following information relates to Blue Spruce Corp. for the...
asked 23 minutes ago -
An unknown amount of a compound with a molecular mass of 284.04
g/mol is dissolved in...
asked 29 minutes ago -
You are at rest at a stop sign. There is another stop sign that
is 100...
asked 30 minutes ago -
Calculate the equilibrium electrode potential for Fe3+/Fe2+
redox system, if the initial concentration of Fe2+ is...
asked 33 minutes ago -
Describe in detail with graph and diagram how bonding force,
bonding curves and bonding energy at...
asked 50 minutes ago -
Gingerbread cookies become inedible if not eaten quickly enough.
Clarence is trying to determine how many...
asked 46 minutes ago -
A
crane lifts a 200 kg block a height of 10 m in 18 seconds. What...
asked 49 minutes ago -
A 12.0-g bullet is fired horizontally into a 115-g wooden block
that is initially at rest...
asked 49 minutes ago -
Which DNA primer would have the HIGHEST melting temperature?
Question 17 options:
a)
GCATCGGC
b)
AATCGGAT...
asked 57 minutes ago -
what is the charge on the chromium ion in Cr2O3.
a -3
b -2
c 0...
asked 57 minutes ago