Question

can you use excel Rollins Corporation is estimating its WACC.  Its only bond issue has a 6.07...

can you use excel

Rollins Corporation is estimating its WACC.  Its only bond issue has a 6.07 percent annual yield to maturity, par value of $1,000, mature in 20 years, and has a 5.2% coupon paid semiannually (2.6%).  There is $100 million total par value of debt outstanding.  The firm currently has a $100 par preferred stock that pays a 7.5 percent annual dividend and currently yields 6 percent.  Flotation costs of 5 percent must be incurred on any new issue of preferred.  Current outstanding preferred stock has a total book value of $8 million.  Rollins' beta is 1.25, the risk-free rate is 4.5 percent, and the market risk premium is 6 percent. Rollins is a constant-growth firm that just paid a dividend of $0.47 last year.  Its common stock sells for $10.00 per share, has a dividend growth rate of 7 percent, and there are 10 million shares outstanding.  The CFO estimates that internally generated cash will be sufficient to supply additional equity funding.  The firm's policy is to use a risk premium of 6 percentage points when using the bond-yield-plus-risk-premium method to find rs.  The firm's marginal tax rate is 40 percent.  Please show all work and place answers in the space provided.  If you get stuck on an answer, assume a number, tell me, and continue onward to receive credit on other answers.

  1. What is Rollins' cost of debt?____________
  1. What is Rollins' cost of preferred stock?________
  1. What is Rollins' cost of common stock (rs) using the CAPM approach?_______

  1. What is the firm's cost of common stock (rs) using the DCF approach?_______
  1. What is Rollins' cost of common stock using the bond-yield-plus-risk-premium approach?_______
  1. Given your answers to the three previous questions, provide and explain your estimate of the cost of equity?________
  1. What are the appropriate weights for debt, preferred stock, and common stock?

            Debt weight                           _______

            Preferred stock weight         _______

            Common equity weight        _______

  1. What is Rollins' WACC?_______
Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

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
can you use excel Rollins Corporation is estimating its WACC.  Its only bond issue has a 6.07...
can you use excel Rollins Corporation is estimating its WACC.  Its only bond issue has a 6.07 percent annual yield to maturity, par value of $1,000, mature in 20 years, and has a 5.2% coupon paid semiannually (2.6%).  There is $100 million total par value of debt outstanding.  The firm currently has a $100 par preferred stock that pays a 7.5 percent annual dividend and currently yields 6 percent.  Flotation costs of 5 percent must be incurred on any new issue of preferred.  Current outstanding...
Can you use Excel Rollins Corporation is estimating its WACC.  Its only bond issue has a 6.07...
Can you use Excel Rollins Corporation is estimating its WACC.  Its only bond issue has a 6.07 percent annual yield to maturity, par value of $1,000, mature in 20 years, and has a 5.2% coupon paid semiannually (2.6%).  There is $100 million total par value of debt outstanding.  The firm currently has a $100 par preferred stock that pays a 7.5 percent annual dividend and currently yields 6 percent.  Flotation costs of 5 percent must be incurred on any new issue of preferred.  Current outstanding...
Can you do in excel Rollins Corporation is estimating its WACC.  Its only bond issue has a...
Can you do in excel Rollins Corporation is estimating its WACC.  Its only bond issue has a 6.07 percent annual yield to maturity, par value of $1,000, mature in 20 years, and has a 5.2% coupon paid semiannually (2.6%).  There is $100 million total par value of debt outstanding.  The firm currently has a $100 par preferred stock that pays a 7.5 percent annual dividend and currently yields 6 percent.  Flotation costs of 5 percent must be incurred on any new issue of preferred.  Current...
Can you do in excel Rollins Corporation is estimating its WACC.  Its only bond issue has a...
Can you do in excel Rollins Corporation is estimating its WACC.  Its only bond issue has a 6.07 percent annual yield to maturity, par value of $1,000, mature in 20 years, and has a 5.2% coupon paid semiannually (2.6%).  There is $100 million total par value of debt outstanding.  The firm currently has a $100 par preferred stock that pays a 7.5 percent annual dividend and currently yields 6 percent.  Flotation costs of 5 percent must be incurred on any new issue of preferred.  Current...
Rollins Corporation is estimating its WACC.  Its only bond issue has a 6.07 percent annual yield to...
Rollins Corporation is estimating its WACC.  Its only bond issue has a 6.07 percent annual yield to maturity, par value of $1,000, mature in 20 years, and has a 5.2% coupon paid semiannually (2.6%).  There is $100 million total par value of debt outstanding.  The firm currently has a $100 par preferred stock that pays a 7.5 percent annual dividend and currently yields 6 percent.  Flotation costs of 5 percent must be incurred on any new issue of preferred.  Current outstanding preferred stock has a...
Rollins Corporation is estimating its WACC. Its target capital structure is 20 percent debt, 20 percent...
Rollins Corporation is estimating its WACC. Its target capital structure is 20 percent debt, 20 percent preferred stock, and 60 percent common equity. Its bonds have a 12 percent coupon, paid semiannually, a current maturity of 20 years, and sell for $1,000. The firm could sell, at par, $100 preferred stock which pays a 12 percent annual dividend, but flotation costs of 5 percent would be incurred. Rollins' beta is 1.2, the risk-free rate is 10 percent, and the market...
Rollins Corporation is estimating its WACC. Its target capital structure is 20 percent debt, 20 percent...
Rollins Corporation is estimating its WACC. Its target capital structure is 20 percent debt, 20 percent preferred stock, and 60 percent common equity. Rollins' beta is 1.6 , the risk-free rate is 4 percent, and the market risk premium is 5 percent. Rollins is a constant-growth firm which just paid a dividend of $2.00, sells for $30 per share, and has a growth rate of 5 percent. The firm's policy is to use a risk premium of 5 percentage points...
Rollins Corporation is estimating its WACC. Its target capital structure is 20 percent debt, 20 percent...
Rollins Corporation is estimating its WACC. Its target capital structure is 20 percent debt, 20 percent preferred stock, and 60 percent common equity. Its bonds have a 7.5 percent coupon, paid semiannually, a current maturity of 20 years, and sell for $1,105.78. The firm could sell, at par, $100 preferred stock which pays a 8 percent annual dividend, but flotation costs of 5 percent would be incurred. Rollins' beta is 1.8, the risk-free rate is 2.45 percent, and the market...
Rollins Corporation is estimating its WACC. Its target capital structure is 20 percent debt, 20 percent...
Rollins Corporation is estimating its WACC. Its target capital structure is 20 percent debt, 20 percent preferred stock, and 60 percent common equity. Its bonds have a 12 percent coupon rate paid semiannually, a current maturity of 20 years, and a price of $1,000. The firm could sell preferred stock dividends at $12 with a price of $100. Rollins's beta is 1.2, the risk-free rate is 11 percent, and the market risk premium is 5 percent. Rollins is a constant-growth...
Rollins Corporation has a target capital structure consisting of 20% debt, 20% preferred stock, and 60%...
Rollins Corporation has a target capital structure consisting of 20% debt, 20% preferred stock, and 60% common equity. Assume the firm has insufficient retained earnings to fund the equity portion of its capital budget. It has 20-year, 12% semiannual coupon bonds that sell at their par value of $1,000. The firm could sell, at par, $100 preferred stock that pays a 12% annual dividend, but flotation costs of 5% would be incurred. Rollins’ beta is 1.2, the risk-free rate is...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT