You would like to estimate the weighted average cost of capital for a new airline business....
You would like to estimate the weighted average cost of capital for a new airline business. Based on its industry asset beta, you have already estimated an unlevered cost of capital for the firm of 9 % . However, the new business will be 26 % debt financed, and you anticipate its debt cost of capital will be 7 % . If its corporate tax rate is 38 % , what is your estimate of its WACC?
The equity cost of capital is %. (Round to one decimal place.)
Homework Answers
WACC = we*Re + wd*Rd*(1-Tc)
where,
wd = weight the firm’s debt = 0.26
we = weight firm’s equity = 1 - 0.26 = 0.74
Re = cost of equity = 0.09
Rd = cost of debt = 0.07
Tc = corporate tax rate = 0.38
=> WACC = 0.74*0.09 + 0.26*0.07*(1-0.38) = 0.0779 or 7.79%
Add Answer to:
You would like to estimate the weighted average cost of capital
for a new airline business....
6. 6: The Cost of Capital: Weighted Average Cost of Capital The Cost of Capital: Weighted...
6. 6: The Cost of Capital: Weighted Average Cost of Capital The Cost of Capital: Weighted Average Cost of Capital The firm's target capital structure is the mix of debt, preferred stock, and common equity the firm plans to raise funds for its future projects. The target proportions of debt, preferred stock, and common equity, along with the cost of these components, are used to calculate the firm's weighted average cost of capital (WACC). If the firm will not have...
Determining the cost of Capital: Weighted Average Cost of Capital The firm's target capital structure is...
Determining the cost of Capital: Weighted Average Cost of Capital The firm's target capital structure is the mix of debt, preferred stock, and common equity the firm plans to raise funds for its future projects. The target proportions of debt, preferred stock, and common equity, along with the cost of these components, are used to calculate the firm's weighted average cost of capital (WACC). If the firm will not have to issue new common stock, then the cost of retained...
The Cost of Capital: Weighted Average Cost of Capital The firm's target capital structure is the...
The Cost of Capital: Weighted Average Cost of Capital The firm's target capital structure is the mix of debt, preferred stock, and common equity the firm plans to raise funds for its future projects. The target proportions of debt, preferred stock, and common equity, along with the cost of these components, are used to calculate the firm's weighted average cost of capital (WACC). If the firm will not have to issue new common stock, then the cost of retained earnings...
Determining the Cost of Capital: Weighted Average Cost of Capital The firm's target capital structure is...
Determining the Cost of Capital: Weighted Average Cost of Capital The firm's target capital structure is the mix of debt, preferred stock, and common equity the firm plans to raise funds for its future projects. The target proportions of debt, preferred stock, and common equity, along with the cost of these components, are used to calculate the firm's weighted average cost of capital (WACC). If the firm will not have to issue new common stock, then the cost of retained...
1. The weighted average cost of capital (WACC) is calculated as the weighted average of cost of component capital, i...
1. The weighted average cost of capital (WACC) is calculated as the weighted average of cost of component capital, including debt, preferred stock and common equity. In general, debt is less expensive than equity because it is less risky to the investors. Some managers may intend to increase the usage of debt, therefore increase the weight on debt (Wd). Do you think by increasing the weight on debt (Wj) will reduce the WACC infinitely? What are the benefits and costs...
Keep the Highest: /2 Attempts: 6. 6: The Cost of Capital: Weighted Average Cost of Capital...
Keep the Highest: /2 Attempts: 6. 6: The Cost of Capital: Weighted Average Cost of Capital The Cost of Capital: Weighted Average Cost of Capital The firm's target capital structure is the mix of debt, preferred stock, and common equity the firm plans to raise funds for its future projects. The target proportions of debt, preferred stock, and common equity, along with the cost of these components, are used to calculate the firm's weighted average cost of capital (WACC). If...
Advertising firm Harry Davis Industries has asked you to estimate its weighted average cost of capital....
Advertising firm Harry Davis Industries has asked you to estimate its weighted average cost of capital. To that end, they have provided you with the following information: Tax rate is 40% Harry Davis can issue bonds with a 12% semiannual coupon, a $1000 par value, and a 15 year maturity, at a price of $1153.72 net of floatation costs. The firm has no preferred stock. The firm’s common stock is currently selling at a price of...
Save Submit Assignment for Grading Questio Cost of Capital: Weighted Average Cost of Capital Question 6...
Save Submit Assignment for Grading Questio Cost of Capital: Weighted Average Cost of Capital Question 6 of 6 Check My Work The Cost of Capital: Weighted Average Cost of Capital The firm's target capital structure is the mix of debt, preferred stock, and common equity the firm plans to raise funds for its future projects. The target proportions of debt, preferred stock, and common equity, along with the cost of these components, are used to calculate the firm's weighted average...
Weighted Average Cost of Capital The firm's target capital structure is the mix of debt, preferred...
Weighted Average Cost of Capital The firm's target capital structure is the mix of debt, preferred stock, and common equity the firm plans to raise funds for its future projects. The target proportions of debt, preferred stock, and common equity, along with the cost of these components, are used to calculate the firm's weighted average cost of capital (WACC). If the firm will not have to issue new common stock, then the cost of retained earnings is used in the...
Attempts: 0 Keep the Highest: 0/2 5. 6: The Cost of Capital: Weighted Average Cost of...
Attempts: 0 Keep the Highest: 0/2 5. 6: The Cost of Capital: Weighted Average Cost of Capital The firm's target capital structure is the mix of debt, preferred stock, and common equity the firm plans to raise funds for its future projects. The target proportions of debt, preferred stock, and common equity, along with the cost of these components, are used to calculate the firm's weighted average cost of capital (WACC). If the firm will not have to issue new...
6. 6: The Cost of Capital: Weighted Average Cost of Capital The Cost of Capital: Weighted Average Cost of Capital The firm's target capital structure is the mix of debt, preferred stock, and common equity the firm plans to raise funds for its future projects. The target proportions of debt, preferred stock, and common equity, along with the cost of these components, are used to calculate the firm's weighted average cost of capital (WACC). If the firm will not have...
Determining the cost of Capital: Weighted Average Cost of Capital The firm's target capital structure is the mix of debt, preferred stock, and common equity the firm plans to raise funds for its future projects. The target proportions of debt, preferred stock, and common equity, along with the cost of these components, are used to calculate the firm's weighted average cost of capital (WACC). If the firm will not have to issue new common stock, then the cost of retained...
The Cost of Capital: Weighted Average Cost of Capital The firm's target capital structure is the mix of debt, preferred stock, and common equity the firm plans to raise funds for its future projects. The target proportions of debt, preferred stock, and common equity, along with the cost of these components, are used to calculate the firm's weighted average cost of capital (WACC). If the firm will not have to issue new common stock, then the cost of retained earnings...
Determining the Cost of Capital: Weighted Average Cost of Capital The firm's target capital structure is the mix of debt, preferred stock, and common equity the firm plans to raise funds for its future projects. The target proportions of debt, preferred stock, and common equity, along with the cost of these components, are used to calculate the firm's weighted average cost of capital (WACC). If the firm will not have to issue new common stock, then the cost of retained...
1. The weighted average cost of capital (WACC) is calculated as the weighted average of cost of component capital, including debt, preferred stock and common equity. In general, debt is less expensive than equity because it is less risky to the investors. Some managers may intend to increase the usage of debt, therefore increase the weight on debt (Wd). Do you think by increasing the weight on debt (Wj) will reduce the WACC infinitely? What are the benefits and costs...
Keep the Highest: /2 Attempts: 6. 6: The Cost of Capital: Weighted Average Cost of Capital The Cost of Capital: Weighted Average Cost of Capital The firm's target capital structure is the mix of debt, preferred stock, and common equity the firm plans to raise funds for its future projects. The target proportions of debt, preferred stock, and common equity, along with the cost of these components, are used to calculate the firm's weighted average cost of capital (WACC). If...
Save Submit Assignment for Grading Questio Cost of Capital: Weighted Average Cost of Capital Question 6 of 6 Check My Work The Cost of Capital: Weighted Average Cost of Capital The firm's target capital structure is the mix of debt, preferred stock, and common equity the firm plans to raise funds for its future projects. The target proportions of debt, preferred stock, and common equity, along with the cost of these components, are used to calculate the firm's weighted average...
Weighted Average Cost of Capital The firm's target capital structure is the mix of debt, preferred stock, and common equity the firm plans to raise funds for its future projects. The target proportions of debt, preferred stock, and common equity, along with the cost of these components, are used to calculate the firm's weighted average cost of capital (WACC). If the firm will not have to issue new common stock, then the cost of retained earnings is used in the...
Attempts: 0 Keep the Highest: 0/2 5. 6: The Cost of Capital: Weighted Average Cost of Capital The firm's target capital structure is the mix of debt, preferred stock, and common equity the firm plans to raise funds for its future projects. The target proportions of debt, preferred stock, and common equity, along with the cost of these components, are used to calculate the firm's weighted average cost of capital (WACC). If the firm will not have to issue new...
Most questions answered within 3 hours.
-
Function 4: my-map
In CLISP define your own function that duplicates the
functionality of mapcar from...
asked 19 minutes ago -
Imagine you are progressing very well
during your job interview and you are confidently prepared to...
asked 18 minutes ago -
You have 2.50 L of a 0.450 M HCOOH and 0.550 M HCOONa buffer
solution. (Ka...
asked 20 minutes ago -
The Maxit Corporation has a standard costing system in which
variable manufacturing overhead is assigned to...
asked 38 minutes ago -
Let M = 8.00kg, m = 6.00kg, θ = 40.00, and the coefficient of
kinetic friction...
asked 55 minutes ago -
Java. For C through H True or false?
c. Primitive variables must be objects.
d. Integer...
asked 1 hour ago -
Write a program that turns a 32-bit numeric value (e.g.,
0xFFFFh) and converts it to a...
asked 1 hour ago -
A motor produces a torque of 0.25 N m at an angular velocity of
7200 revolutions...
asked 1 hour ago -
***Please answer the below java question***
Are static methods inheritable? Can they be overridden?
asked 1 hour ago -
In reaching her destination, a backpacker walks with an average
velocity of 1.13 m/s, due west....
asked 1 hour ago -
Write two C programs that run a
server program and a client program concurrently.
Server program:...
asked 1 hour ago -
Executive Program Practical Connection Assignment
Subject : Operations Security.
Assignment:
Provide a reflection of at least...
asked 1 hour ago