Question

For the most recent fiscal year, book value of long-term debt at Schlumberger was $10,184 million. The market value of this long-term debt is approximately equal to its book value. Schlumberger’s share price currently is $58.92. The company has 1,000 million shares outstanding.

Managers at Schlumberger estimate that the yield to maturity on any new bonds issued by the company will be 8.69%. Schlumberger’s marginal tax rate would be 35%.

Schlumberger’s beta is 0.76. Suppose that the expected return on the market portfolio is 8% and the risk-free rate is 2%.

Assume that the company will not change its capital structure. Also assume that the business risk of the projects under consideration is about the same as the business risk of Schlumberger as a whole.

What would Schlumberger’s after-tax WACC be, given this information?

Do not round at intermediate steps in your calculation. Express your answer in percent. Round to two decimal places. Do not type the % symbol.

Answer #1

For the most recent fiscal year, book value of long-term debt at
Schlumberger was $13633 million. The market value of this long-term
debt is approximately equal to its book value. Schlumberger’s share
price currently is $46.28. The company has 1,000 million shares
outstanding.
Managers at Schlumberger estimate that the yield to maturity on
any new bonds issued by the company will be 10.52%. Schlumberger’s
marginal tax rate would be 35%.
Schlumberger’s beta is 0.88. Suppose that the expected return on...

For the most recent fiscal year, book value of long-term debt at
Schlumberger was $11,447 million. The market value of this
long-term debt is approximately equal to its book value.
Schlumberger’s share price currently is $47.14. The company has
1,000 million shares outstanding. Managers at Schlumberger estimate
that the yield to maturity on any new bonds issued by the company
will be 13.91%. Schlumberger’s marginal tax rate would be 35%.
Schlumberger’s beta is 0.75. Suppose that the expected return on...

You have the following data on The Home Depot, Inc.
Market value of long-term debt: $20,888 million
Market value of common stock: $171,138 million
Beta: 1.04
Yield to maturity on debt with 10 years to maturity: 2.167%
Expected return on equity: 8.771%
Marginal tax rate: 35%
Assume that if Home Depot issues new bonds, the bonds will have
10 years to maturity.
Suppose that managers at Home Depot decide to increase the
proportion of debt to 20% of the value...

For the fiscal year ending December 2015, ExxonMobil had a book
value of $104,496 million in long-term liabilities and a book value
of $174,590 million in total stockholder equity. What was
ExxonMobil’s book debt-to-equity ratio? Do not round at
intermediate steps in your calculation. Express your answer in
decimal form to three decimal places.

LIS Company has $60 million in long-term debt, $85 million in
shareholder’s equity [both figures are market value basis]. The
cost of equity is 13%, cost of long-term debt is 8.5% and the tax
rate is 18%. (a) What is the weighted average cost of capital
[WACC] for LIS? (b)LIS Company has a pretax income of $13.5
million. What is the value of the company based on calculation
(a)

LIS Company has $50 million in long-term debt, $75 million in
shareholder’s equity [both figures are market value basis]. The
cost of equity is 14%, cost of long-term debt is 12% and the tax
rate is 25%. What is the weighted average cost of capital [WACC]
for LIS?
LIS Company has a pretax income of $12.5 million. What
is the value of the company based on correct calculation of
#1?

You have the following data on The Home Depot, Inc.
Market value of long-term debt: $20,888 million
Market value of common stock: $171,138 million
Beta: 1.11
Yield to maturity on debt with 10 years to maturity: 2.99%
You also have the following market data:
Expected annual return on the market portfolio: 8%
Annual risk-free rate: 1%
Assume that if Home Depot issues new bonds, the bonds will have
10 years to maturity. What is the company’s return on assets?
Do...

The WACC calculation is based on :
1) The book value of all sources of long-term capital
2) The book value of debt and the market value of all other
sources of capital
3) The market value of equity only.
4) The market values of all sources of long-term capital
5) The book values of debt and equity only

MV Corporation has debt with market value of $ 103 ?million,
common equity with a book value of $ 105 ?million, and preferred
stock worth $ 18 million outstanding. Its common equity trades at $
46 per? share, and the firm has 5.5 million shares outstanding.
What weights should MV Corporation use in its? WACC?
The debt weight for the WACC calculation is ?%. ?(Round to two
decimal? places.)
The preferred stock weight for the WACC calculation is %. (Round...

Book Co. has 1.4 million shares of common equity with a par?
(book) value of $ 1.35?, retained earnings of $ 29.9 ?million, and
its shares have a market value of $ 50.41 per share. It also has
debt with a par value of $ 18.3 million that is trading at 104 % of
par.
a. What is the market value of its? equity?
The market value of the equity is ?$ million. ?(Round to two
decimal? places.)
b. What...

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