Question

Your task is to determine the WACC for a given firm using what you know about WACC as well as data you can find through research. Your deliverable is a brief report in which you state your determination of WACC, describe and justify how you determined the number, and provide relevant information as to the sources of your data.

**Select** a publicly traded company that has debt
or bonds and common stock to calculate the current WACC. One good
source for financial data for companies as well as data about their
equity is Yahoo! Finance. By looking around this site, you should
be able to find the market capitalization (E) as well as the β for
any publicly traded company.

There are not many places left where data about corporate bonds is still available. One of them is the Finra Bonds website. To find data for a particular company’s bonds, find the Quick Search feature, then be sure to specify corporate bonds and type in the name of the issuing company. This should give you a list of all of the company’s outstanding bond issues. Clicking on the symbol for a given bond issue will lead you to the current amount outstanding and the yield to maturity. You are interested in both. The total of all bonds outstanding is D in the above formula.

If you like, you can use the YTM on a bond issue that is not callable as the pre-tax cost of debt for the company.

**Assumptions:**

As you recall, the formula for WACC is:

rWACC = (E/E+D) rE + D/(E+D) rD (1-TC)

The formula for the required return on a given equity investment is:

ri= rf + βi * (RMkt-rf)

RMkt-rf is the Market Risk Premium. For this project, you may assume the Market Risk Premium is 5% unless you can develop a better number.

rf is the risk free rate. The risk free rate is normally the yield on US Treasury securities such as a 10-year treasury. For this assignment, please use 3.5%.

You may assume a corporate tax rate of 40%.

**Submit** the following:

**Write** a 350- to 700-word report that contains
the following elements:

Your calculated WACC.

How data was used to calculate WACC. This would be the formula and the formula with your values substituted.

Sources for your data.

A discussion of how much confidence you have in your answer. What were the limiting assumptions that you made, if any?

Answer #1

There is very much importance of assessing time and risk in making
financial decisions as financial decisions are not taken overnight
and requires a lot of investment to be done.

Further there is always a risk in financial decisions because of involvement of money.

Future retirement needs are always required by everyone whether he is part of the business or not.

To meet future goals like : home ownership, business start ups, family goals,and/or retirerent with the human tendency to prefer "now" over "later" because humans always wants to be safe and secure for the future.

Given the following information for Cleen Power Co., find the
WACC. Assume the company's tax rate is 35%
Debt: 7,000 6% coupon bonds outstanding, $1,000 par value, 20
years to maturity, selling for 105% pf par; the bonds make
semiannual payments
Common Stock: 180,000 shares outstanding, selling for $58 per
share; the beta is 1.10
Market: 6.5% market risk premium and 4.3% risk-free rate.
Required:
1. Find the market value of each type of
financing
Bonds =
Stock =
Total...

You have been given the task of calculating the WACC of ABC Inc.
You will use the following information to calculate the WACC.
The firm has 3000 coupon paying bonds outstanding. Each
coupon-paying bond has a face value of $1000, will mature 10 years
from today, and is currently priced at 130% of the face value. The
annual coupon rate is 12%, and coupon is paid on an annual
basis.
The company has 500,000 common shares outstanding, and each
share...

You have been given the task of calculating the WACC of ABC Inc.
You will use the following information to calculate the WACC.
The firm has 3000 coupon paying bonds outstanding. Each
coupon-paying bond has a face value of $1000, will mature 10 years
from today, and is currently priced at 130% of the face value. The
annual coupon rate is 12%, and coupon is paid on an annual
basis.
The company has 500,000 common shares outstanding, and each
share...

You have been given the task of calculating the WACC of ABC Inc.
You will use the following information to calculate the WACC. The
firm has 3000 coupon paying bonds outstanding. Each coupon-paying
bond has a face value of $1000, will mature 10 years from today,
and is currently priced at 130% of the face value. The annual
coupon rate is 12%, and coupon is paid on an annual basis. The
company has 500,000 common shares outstanding, and each share...

What is the WACC for the firm below? Market risk premium = 9%,
risk-free rate = 4%, marginal tax rate = 40% Bonds: 10,000 bonds
outstanding, $1,000 face value each, 10% annual coupon, 15 years to
maturity, market price = $1100 per bond Common Stock: 2 million
shares outstanding, $50 per share, beta = 1.5
A. 16.30% B. 12.30% C. 14.30% D. 15.30% E. 11.30%

The capital structure of a firm consists of debt and equity. The
firm has 100,000 bonds outstanding that are selling at par value.
The par value of the bonds is $1,000. Bonds with similar
characteristics are yielding a before-tax return of 7%. The company
also has 5 million shares of common stock outstanding. The stock
has a beta of 1.30 and sells for $50 a share. The rate of return on
U.S. Treasury bills is 5% and the market rate...

Given the following information for Versa Company, find its
WACC. Assume the company s tax rate is 25 percent. Debt: 40,000, 5
percent coupon bonds outstanding, $1,000 par value, 10 years to
maturity, selling for 101 percent of par; the bonds make semiannual
coupon payments. Common stock: 420,000 shares outstanding, selling
for $44 per share; the beta is 1.68. Market: 7.0 percent market
risk premium and 3.5 percent risk-free rate. (Hint: Determine the
cost of debt as YTM then use...

The charter company has the following financing outstanding.
What is the WACC for the company?
Debt: 40,000 bonds with a 8% coupon rate and a current price
quote of 1200 the bonds have 25 years to maturity. 150,000 zero
coupon bonds with a price quote of 185 and 30 years to
maturity.
Preferred Stock: 100,000 shares of 5% preferred stock with a
current price of $78, and a par value of $100.
Common Stock: 1,800,000 shares of Common Stock; the...

Your firm has a credit rating of A.
You notice that the credit spread for 10-year maturity debt is 90
basis points (0.90%).
Your firm’s ten-year debt has a coupon rate of 5%.
You see that new 10-year Treasury notes are being
issued at par with a coupon rate of 4.5%. What should the price of
your outstanding 10-year bonds be?
(Assume face value is $100 & interests are paid
semi-annually)
Answer good?
Bond Price Formula = Coupon Rate x...

5. Suppose 10-year T-bonds have a yield of 5.30% and 10-year
corporate bonds yield 6.75%. Also, corporate bonds have a 0.25%
liquidity premium versus a zero liquidity premium for T-bonds, and
the maturity risk premium on both Treasury and corporate 10-year
bonds is 1.15%. What is the default risk premium on corporate
bonds?
A. 1.08%
B. 1.20%
C. 1.32%
D. 1.45%
E. None of the above.
6. A company has two $1,000 face value bonds outstanding bond
selling for $701.22....

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