Question

Consider a company that has the following values: Cost of equity 17.6% Cost of debt 9.5%...

Consider a company that has the following values:

Cost of equity 17.6%

Cost of debt 9.5%

Book value of equity $1,700,000

Book value of debt $500,000

Market value of equity $2,319,000

Market value of debt $541,650

using the WACC formula, What is this company’s WACC, assuming no taxes?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Market value numbers are used in WACC formula as it would give out a correct picture based on current prevailing rates,

calc:

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
PQR Company has the following: Borrowing rate of 7.0% Cost of equity of 25.0% Corporate tax...
PQR Company has the following: Borrowing rate of 7.0% Cost of equity of 25.0% Corporate tax rate of 21.0% Book value of debt = $630,000 Book value of equity = $1,250,000 Market value of debt = $630,000 Market Value of equity = $2,750,000 PQR Company’s weighted average cost of capital (WACC) is: 21.6% 19.0% 21.4% 18.5%
A company has a targeted capital structure of 50% debt and 50% equity. Bond (debt) with...
A company has a targeted capital structure of 50% debt and 50% equity. Bond (debt) with face value (or principal amount) of $1200.00 paid 12% coupon annually, mature in 20 years and sell for $950.90. The company’s stock beta is 1.4, the risk free rate is 9% and market risk premium is 6%. The company has a constant growth rate of 6% and a just paid dividend of $3 and sells at $32 per share. If the company’s marginal, tax...
A company has a targeted capital structure of 50% debt and 50% equity. Bond (debt) with...
A company has a targeted capital structure of 50% debt and 50% equity. Bond (debt) with face value (or principal amount) of $1200.00 paid 12% coupon annually, mature in 20 years and sell for $950.90. The company’s stock beta is 1.4, the risk free rate is 9% and market risk premium is 6%. The company has a constant growth rate of 6% and a just paid dividend of $3 and sells at $32 per share. If the company’s marginal, tax...
A private firm has equity of 4000 and debt of 1000 (book values) and a FCFF...
A private firm has equity of 4000 and debt of 1000 (book values) and a FCFF of 100. The risk premium is 6%, the risk-free rate 3% and the corporate tax rate 30%. Cost of debt is 4% and the expected growth rate of FCFF is 2% forever. The firm operates in a sector with an unlevered beta of 0.5. Assume that the book and market values of debt are the same. Find the “market” value of equity that produces...
Pfd Company has debt with a yield to maturity of 6.5 %?, a cost of equity...
Pfd Company has debt with a yield to maturity of 6.5 %?, a cost of equity of 13.5 %?, and a cost of preferred stock of 10.3 %. The market values of its? debt, preferred? stock, and equity are $ 12.7 ?million, $ 2.7 ?million, and $ 16.2 ?million, respectively, and its tax rate is 40 %. What is this? firm's after-tax? WACC? a). ?Pfd's WACC is _________ Percent
A company has a cost of debt of 7.74%, a cost of common equity of 11.94%,...
A company has a cost of debt of 7.74%, a cost of common equity of 11.94%, and a cost of preferred stock of 8.84%. All three costs are before taxes. The company has 104,000 shares of common stock outstanding at a market price of $28.50 a share. There are 40,000 shares of preferred stock outstanding at a market price of $42.10 a share. The bond issue has a total face value of $500,000 and sells at 101.5% of face value....
Your company has the debt to equity breakdown below. The cost of debt is 4% (based...
Your company has the debt to equity breakdown below. The cost of debt is 4% (based on the interest on debt of 5% and the tax rate of 20%) and the cost of the equity is 8%.      COST OF CAPITAL PROPORTION OF TOTAL ASSETS Equity 8% .50 Debt 4% based on interest rate(1-t) .50 A) What is your company’s Weighted Average Cost of Capital (WACC)? B) Your company’s Recruiting Division has $920,000 in total assets, which is the total...
Company A currently has market capitalization (value of its equity) of $9,062.49 million, a debt-equity ratio...
Company A currently has market capitalization (value of its equity) of $9,062.49 million, a debt-equity ratio of .1822, and a WACC of 4.65%. The government of the country in which Company A operates, Utopia, has no corporate taxes (T=0). The Firm has decided it’s a good time to restructure its capital. It will buy back some of its debt and issue new equity to achieve the industry-average debt-equity ratio of 0.54. What will the Company’s weighted average cost of capital...
The debt/equity ratio is 1.2. The value of your company (debt + equity) is $6,000,000. Your...
The debt/equity ratio is 1.2. The value of your company (debt + equity) is $6,000,000. Your company wants to use CAPM to calculate the cost of equity. Beta is 1.23. The market risk premium is 7% and the market return is 10%. Your debt is trading at par value and has a coupon rate of 4%. Relevant tax rate is 21%. What is your company’s WACC? Multiple Choice 5.31% 9.47% 10.42% 7% 8.12%
Testing Company, Inc. has the following combination of Debt and Equity: Common Stock: 15.5 million shares...
Testing Company, Inc. has the following combination of Debt and Equity: Common Stock: 15.5 million shares outstanding Par value of $5/share Book value of $20/share Current price on the market of $65.25 Current Beta per a reliable source 1.13 Debt: Maturity value of $500,000,000 Current price on the market of 97.3 Coupon rate if 4% Semiannual payments 10 years until maturity Other information: Treasury bill rates — 2.45% Market premium on this type of stock — 7.1% Tax rate —...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT