Question

Addisons Equipment has 40,000 bonds outstanding that are selling at 103% of par. These bonds have a $1,000 face value. Bonds with similar characteristics are yielding 6 percent. The company also has 1.5 million shares of common stock outstanding. The common stock has a beta of 1.2 and sells for $53.31 a share. The U.S. Treasury bill is yielding 1 percent and the expected return on the market is 7 percent. The corporate tax rate is 40 percent. The WACC for Addisons is closest to:

13.07%

3.60%

7.45%

6.64%

12.98%

Answer #1

Phillips Equipment has 80,000 bonds outstanding that are selling
at par. Bonds with similar characteristics are yielding 7.5
percent. The company also has 750,000 shares of 7 percent preferred
stock and 2.5 million shares of common stock outstanding. The
preferred stock sells for $65 a share. The common stock has a beta
of 1.34 and sells for $42 a share. The cost of equity is 14.06
percent. The corporate tax rate is 38 percent. What is the firm's
weighted average...

A firm has 75,000 bonds outstanding that are selling at par.
Bonds with similar characteristics are yielding 7.50% (market
rate). The company also has 750,000 shares of 6% preferred stock
and 2.5 million shares of common stock outstanding. The preferred
stock sells for $64 per share. The common stock has a beta of 1.21
and sells for $44 per share. The U.S. Treasury bill is yielding
2.30% (market rate) and the return on the market is 11.20%. The
corporate tax...

Apisco Tiger Inc. has 66,000 bonds outstanding that are selling
at par. The face value of each bond is $1,000. Bonds with similar
characteristics have yield to maturity of 6.5 percent. The company
also has 600,000 shares of preferred stock and 2.5 million shares
of common stock outstanding. The preferred stock sells for $40 a
share and pays annual dividends of $3.20 per share. The common
stock has beta of 1.25 and sells for $44 a share. The risk free...

BlockOut Co. has 79,172 bonds outstanding that are selling at
par value. The bonds yield 8.1 percent. The company also has 5.5
million shares of common stock outstanding. The stock has a beta of
1.36 and sells for $43.6 a share. The U.S. Treasury bill is
yielding 3.9 percent and the market risk premium is 7.6 percent.
Blackout's tax rate is 32 percent. What is the firm's weighted
average cost of capital? (Enter answer in percents.)

Jack's Construction Co. has 100,000 bonds outstanding that are
selling at par value. The bonds yield 9.3 percent. The company also
has 3.8 million shares of common stock outstanding. The stock has a
beta of 1.6 and sells for $65 a share. The U.S. Treasury bill is
yielding 6 percent and the market risk premium is 9 percent. Jack's
tax rate is 35 percent. What is Jack's weighted average cost of
capital? 13.70% 15.53% 14.98% 17.54% 16.26%

Jack's Construction Co. has 100,000 bonds outstanding that are
selling at par value. The bonds yield 9.3 percent. The company also
has 3.8 million shares of common stock outstanding. The stock has a
beta of 1.6 and sells for $65 a share. The U.S. Treasury bill is
yielding 6 percent and the market risk premium is 9 percent. Jack's
tax rate is 35 percent. What is Jack's weighted average cost of
capital?
14.98%
16.26%
13.70%
17.54%
15.53%

Phillips Equipment has 75,000 bonds outstanding that are each
selling at $1080 in the market. Each bond has 10 years left to
maturity, a $1000 face value and a coupon rate of 5%. Coupons are
paid semiannually. The company also has 2 million shares of common
stock outstanding. The common stock has a beta of 1.1 and sells for
$30 a share. The U.S. Treasury bill is yielding 4 percent and the
market risk premium is 6 percent. The corporate...

Q1) Jack's Construction Co. has 80,000 bonds outstanding that
are selling at their par value of $1,000 each. The bonds have a
coupon rate and YTM of 8.6 percent. The firm also has 4,000,000
shares of common stock outstanding. The stock has a beta of 1.1 and
sells for $40 a share. The U.S. T-bill is yielding 4 percent, the
market risk premium is 8 percent, and the firm's tax rate is 21
percent.
(a) What is the firm’s cost...

Problem 3
The Smith Company has 10,000 bonds outstanding. The bonds are
selling at 102% of face value, have a 8% coupon rate, pay interest
annually, mature in 10 years, and have a face value of $1,000.
There are 500,000 shares of 9% preferred stock outstanding with a
current market price of $91 a share and a par value of $100. In
addition, there are 1.25 million shares of common stock outstanding
with a market price of $64 a share...

Nike has 9 million shares of common stock outstanding and 12,000
8.5% semiannual bonds outstanding, par value of $10,000 each.
Common stock currently sells for $34 per share and has a beta of
1.20. The bonds have 15 years to maturity and sell for 93% of par.
The market risk premium is 10%, Tbills are yielding 5% and the
firm’s tax rate is 35%. Find Nike’s weighted average cost of
capital (WACC).

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