Question

Calculate the weighted average cost of capital for a company given the following:       Dividend expected...

  1. Calculate the weighted average cost of capital for a company given the following:

      Dividend expected in year one: $1.62/share

      Expected dividend growth rate in perpetuity: 3.5%/year

      Current market price of company’s common stock: $13.00/share

      Company’s debt is in the form of 7-year, 11% (annual) bonds with a face value of $1,000 per bond. Current market value of bonds is $1,058.81/bond

      Number of common stocks outstanding: 21,000,000

      Market value of debt and equity combined: $420 million

      The company’s marginal tax rate: 35%

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
Calculate the weighted average cost of capital for a company given the following:       Dividend expected in...
Calculate the weighted average cost of capital for a company given the following:       Dividend expected in year one: $1.62/share       Expected dividend growth rate in perpetuity: 3.5%/year       Current market price of company’s common stock: $13.00/share       Company’s debt is in the form of 7-year, 11% (annual) bonds with a face value of $1,000 per bond. Current market value of bonds is $1,058.81/bond       Number of common stocks outstanding: 21,000,000       Market value of debt and equity combined: $420 million       The company’s marginal tax rate:...
2. Calculate the weighted average cost of capital for a company given the following information: Price...
2. Calculate the weighted average cost of capital for a company given the following information: Price of the company’s common stock: $30.04 Dividend just been paid: $2.6 Expected perpetual constant growth rate: 4% The company can borrow from its bank at 9% per year The company’s marginal tax rate: 35% The market value of the company’s assets is $160 million financed by $54.40 million in debt and the rest in equity
Calculate the weighted average cost of capital Given: The firm has enough cash on hand to...
Calculate the weighted average cost of capital Given: The firm has enough cash on hand to provide the necessary equity financing (no new common stock). Common Stock/Equity 1,000,000 common shares outstanding Current stock price is $11.25 per share Dividends expected at $1.00 per share Dividends will grow at 5% per year after that Flotation costs for new share would be $0.10 per share Preferred Stock/Equity 150,000 preferred share outstanding Current preferred stock price is $9.50 per share Dividend is $0.95...
17. Given an optimal capital structure that is 40% debt, calculate the weighted average cost of...
17. Given an optimal capital structure that is 40% debt, calculate the weighted average cost of capital given the following additional information: Assume that the company has no outstanding preferred stock. (10 points)  Bond coupon rate 10%  Current market price of the bond $1000  Expected dividend on common stock $4  Common stock price $80  Constant growth rate for common stock 9%  The firm expects to pay total flotation costs of $50,000 when it issues...
Estimating the Weighted Average Cost of Capital Kellogg Company manufactures cereal and other convenience food under...
Estimating the Weighted Average Cost of Capital Kellogg Company manufactures cereal and other convenience food under its many well-known brands such as Kellogg’s®, Keebler®, and Cheez-It®. The company, with over $13.5 billion in annual sales worldwide, partially finances its operation through the issuance of debt. At the beginning of its 2015 fiscal year, it had $6.5 billion in total debt. At the end of fiscal year 2015, its total debt had increased to $6.6 billion. Its fiscal 2015 interest expense...
6. Use the following information to find the weighted average cost of capital for Ashman Motors....
6. Use the following information to find the weighted average cost of capital for Ashman Motors. Debt: 4,500 six percent coupon bonds outstanding, $1,000 par value, 20 years to maturity, selling for 102 percent of par; the bonds make semiannual payments. Common Stock: 100,000 shares outstanding, selling for $43 per share; the beta is 1.3 Preferred Stock: 13,000 shares of 9 percent preferred stock outstanding. Face value of $100 and currently selling for $104 per share. Market: 8 percent market...
Weighted average cost of capital example • A corporation has 10,000 bonds outstanding with a 6%...
Weighted average cost of capital example • A corporation has 10,000 bonds outstanding with a 6% annual coupon rate, 8 years to maturity, a $1,000 face value, and a $1,100 market price. • The company’s 100,000 shares of preferred stock pay a $3 annual dividend, and sell for $30 per share. • The company’s 500,000 shares of common stock sell for $25 per share and have a beta of 1.5. The risk free rate is 4%, and the market return...
Match the Weighted Average Cost of Capital to each of the scenarios given for ABC Corporation....
Match the Weighted Average Cost of Capital to each of the scenarios given for ABC Corporation.                                                 -A.B.C.D.E. Target capital structure: 47% debt, 8% preferred stock and 45% common equity. Yield to maturity on bonds: 8.0%; Preferred stock dividend: $6.40 per year; current market price of preferred stock is $68.90. CAPM data for common equity: risk-free rate is 3.0%; market risk premium for the average...
Use the following information to calculate the firm’s weighted average cost of capital: The dividend for...
Use the following information to calculate the firm’s weighted average cost of capital: The dividend for preferred shares is $5, and the current price for preferred stock is $75. The rate of return on long-term debt is 6%, the rate of return on short-term debt is 5%, and the marginal tax rate is 35%. The market risk premium is 5%, the risk-free rate is 3%, and the firm has a beta of 0.9. The firm’s capital structure is as follows:...
A company’s weighted average cost of capital is 12.1% per year and the market value of...
A company’s weighted average cost of capital is 12.1% per year and the market value of its debt is $70.1 million. The company’s free cash flow last year was $12.3 million and it is expected to grow 30% per year for the next three years. Thereafter, the free cash flow is expected to grow forever at a rate of 6.7% per year. If the company has six million shares of common stock outstanding, what is the value per share? Please...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT