7-Suppose that your company just paid a dividend of $1.2; the dividends are expected to grow at a...
7-Suppose that your company just paid a dividend of $1.2; the dividends are expected to grow at a constant rate of 5% indefinitely. Today’s market price/share is $45. Suppose also that your company has some bonds outstanding in the market selling for $1,035. The bonds have 8 years left to maturity, with 8% coupon rate with semi-annual payments. If your company’s capital structure is 35% debt and 65% equity, with the tax rate of 40% what is the WACC?
Your company’s target capital structure is 35% debt, 15% preferred, and 50% common equity. The yield to maturity on the debt is 7.50%, the return on the preferred is 7.00%, the cost of retained earnings is 12.5%, and the tax rate is 40%. The firm will not be issuing any new security. What is the WACC?
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7-Suppose that your company just paid a dividend of $1.2; the dividends are expected to grow at a...
Recently, L. Chiatti Company paid a $2.37 dividend per share. The dividend is expected to grow at a constant rate of 5.5...
Recently, L. Chiatti Company paid a $2.37 dividend per share. The dividend is expected to grow at a constant rate of 5.50% forever. The common stock of the company currently sells for $52.50 per share. The before-tax cost of debt is 7.50%, and the company’s tax rate is 40%. The target capital structure of the company consists of 45% debt and 55% common equity. What is the company’s WACC if all the equity used is from retained earnings (Note, you...
6. A stock has just paid 56 of dividend. The dividend is expected to grow at...
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Consider the case of Peaceful Book Binding Company The CFO of Peaceful Book Binding Company is...
Consider the case of Peaceful Book Binding Company The CFO of Peaceful Book Binding Company is trying to determine the company’s WACC. He has determined that the company’s before-tax cost of debt is 9.60%. The company currently has $750,000 of debt, and the CFO believes that the book value of the company’s debt is a good approximation for the market value of the company’s debt. • The firm’s cost of preferred stock is 10.70%, and the book value of preferred...
you were hired as a consultant to Giambono Company, whose target capital structure is 40% debt,...
you were hired as a consultant to Giambono Company, whose target capital structure is 40% debt, 15% preferred, and 45% common equity. The after-tax cost of debt is 6%, the cost of preferred is 7.50%, and the common stock has the following CAPM data: risk free rate of 5%, market risk premium of 6%, and beta 1.05. The firm will not be issuing any new stock. What is its WACC
Currently, Bloom Flowers Inc. has a capital structure consisting of 20% debt and 80% equity. Bloom’s...
Currently, Bloom Flowers Inc. has a capital structure consisting of 20% debt and 80% equity. Bloom’s debt currently has an 8% yield to maturity. The risk-free rate (rRF) is 5%, and the market risk premium (rM – rRF) is 6%. Using the CAPM, Bloom estimates that its cost of equity is currently 12.5%. The company has a 40% tax rate. A. What is Bloom’s current WACC? B. What is the current beta on Bloom’s common stock? C. What would Bloom’s...
22. Sorensen Systems Inc. is expected to pay a $2.50 dividend next year, the dividend is...
22. Sorensen Systems Inc. is expected to pay a $2.50 dividend next year, the dividend is expected to grow at a constant rate 5.5% a year, and the common stock currently sells for $37.50 a share. The yield-to-maturity on its outstanding bonds is 7.50%, and the tax rate is 40%. The target capital structure weights consist of 45% debt and 55% common equity. What is the company's WACC if all the equity is used from retained earnings? A) 9.41% B)...
A company has a capital structure that consists of $20 million of debt and $20 million...
A company has a capital structure that consists of $20 million of debt and $20 million of common equity, based upon current market values. The company’s yield to maturity on its bonds is 8%, and the current stock price is $35, the last dividend paid was $1.10 and the dividends are expected to grow at constant rate of 5% for long time. If the tax rate is 40%, what is this company's WACC assuming that there won’t be any new...
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Flag this QuestionQuestion 301 ptsDaves Inc. recently hired you as a consultant to estimate the company’s WACC. You have obtained the following information. (1) The firm's noncallable bonds mature in 20 years, have an 8.00% annual coupon, a par value of $1,000, and a market price of $1,150.00. (2) The company’s tax rate is 40%. (3) The risk-free rate is 4.50%, the market risk premium is 5.50%, and the stock’s beta is 1.20. (4) The target capital structure consists of 35%...
Austin Systems Inc. is expected to pay a $1.61 dividend at year end, the dividend is...
Austin Systems Inc. is expected to pay a $1.61 dividend at year end, the dividend is expected to grow at a constant rate of 2.7% a year, and the common stock currently sells for $23.75 a share. The before-tax cost of debt is 7.50%, and the tax rate is 40%. The target capital structure consists of 45% debt and 55% common equity. What is the company’s WACC if all the equity used is from retained earnings? Enter the answer as...
Your firm recently paid a dividend of $4 to common stockholders. Dividends are expected to grow...
Your firm recently paid a dividend of $4 to common stockholders. Dividends are expected to grow at 8% per year for the foreseeable future. The current stock price is $54. New shares could be sold for the same price, but flotation costs would amount to $6 per share. Preferred stock would pay a 12% dividend on a $50 par value. The stocks would sell for par value less flotation costs of $2 per share. Wellington has a marginal tax rate...
6. A stock has just paid 56 of dividend. The dividend is expected to grow at a constant rate of 9% year, and the common stock currently sells for $89. The before tax cost of debt is 6%, and the tax rate is 45%. The target capital structure consists of 35% debt and 62% common equity. What is the company's WACC if all the equity used is from retained earnings? 11.39% 12.07% 12 10485 10.02 1. A company just paid...
22. Sorensen Systems Inc. is expected to pay a $2.50 dividend next year, the dividend is expected to grow at a constant rate 5.5% a year, and the common stock currently sells for $37.50 a share. The yield-to-maturity on its outstanding bonds is 7.50%, and the tax rate is 40%. The target capital structure weights consist of 45% debt and 55% common equity. What is the company's WACC if all the equity is used from retained earnings? A) 9.41% B)...
Your firm recently paid a dividend of $4 to common stockholders. Dividends are expected to grow at 8% per year for the foreseeable future. The current stock price is $54. New shares could be sold for the same price, but flotation costs would amount to $6 per share. Preferred stock would pay a 12% dividend on a $50 par value. The stocks would sell for par value less flotation costs of $2 per share. Wellington has a marginal tax rate...
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