Question

WACC and Percentage of Debt Financing Hook Industries' capital structure consists solely of debt and common equity. It can issue debt at rd = 9%, and its common stock currently pays a $2.25 dividend per share (D0 = $2.25). The stock's price is currently $22.00, its dividend is expected to grow at a constant rate of 4% per year, its tax rate is 40%, and its WACC is 13.30%. What percentage of the company's capital structure consists of debt? Round your answer to two decimal places.

Answer #1

As per DDM |

Price = recent dividend* (1 + growth rate )/(cost of equity - growth rate) |

22 = 2.25 * (1+0.04) / (Cost of equity - 0.04) |

Cost of equity% = 14.64 |

After tax rate of debt = YTM * (1-Tax rate) |

After tax rate = 9 * (1-0.4) |

After tax rate = 5.4 |

Market value of Capital = Weight of Bond*Market value of Bond+Weight of Equity*Market value of Equity |

13.3 = 5.4*Weight of Bond+14.64*(1-weight of Bond) |

Weight of Bond = 0.145021645 = 14.5% |

WACC and Percentage of Debt Financing
Hook Industries' capital structure consists solely of debt and
common equity. It can issue debt at rd = 11%, and its
common stock currently pays a $2.25 dividend per share
(D0 = $2.25). The stock's price is currently $22.50, its
dividend is expected to grow at a constant rate of 8% per year, its
tax rate is 40%, and its WACC is 14.95%. What percentage of the
company's capital structure consists of debt? Round...

WACC AND PERCENTAGE OF DEBT FINANCING
Hook Industries's capital structure consists solely of debt and
common equity. It can issue debt at rd = 8%, and its
common stock currently pays a $4.00 dividend per share
(D0 = $4.00). The stock's price is currently $23.75, its
dividend is expected to grow at a constant rate of 7% per year, its
tax rate is 40%, and its WACC is 14.80%. What percentage of the
company's capital structure consists of debt? Do...

Financing Hook Industries' capital structure consists solely of
debt and common equity. It can issue debt at rd = 8%, and its
common stock currently pays a $4.00 dividend per share (D0 =
$4.00). The stock's price is currently $25.50, its dividend is
expected to grow at a constant rate of 7% per year, its tax rate is
40%, and its WACC is 14.90%. What percentage of the company's
capital structure consists of debt? Round your answer to two
decimal...

Hook Industries' capital structure consists solely of debt and
common equity. It can issue debt at rd = 9%, and its common stock
currently pays a $2.25 dividend per share (D0 = $2.25). The stock's
price is currently $28.50, its dividend is expected to grow at a
constant rate of 8% per year, its tax rate is 40%, and its WACC is
15.40%. What percentage of the company's capital structure consists
of debt? Round your answer to two decimal places.

Hook Industries' capital structure consists solely of debt and
common equity. It can issue debt at rd = 11%, and its common stock
currently pays a $1.75 dividend per share (D0 = $1.75). The stock's
price is currently $31.00, its dividend is expected to grow at a
constant rate of 9% per year, its tax rate is 35%, and its WACC is
13.45%. What percentage of the company's capital structure consists
of debt? Round your answer to two decimal places.

Hook Industries's capital structure consists solely of debt and
common equity. It can issue debt at rd = 10%, and its
common stock currently pays a $2.50 dividend per share
(D0 = $2.50). The stock's price is currently $22.00, its
dividend is expected to grow at a constant rate of 5% per year, its
tax rate is 35%, and its WACC is 12.45%. What percentage of the
company's capital structure consists of debt? Do not round
intermediate calculations. Round your...

Hook Industries's capital structure consists solely of debt and
common equity. It can issue debt at rd = 10%, and its
common stock currently pays a $4.00 dividend per share
(D0 = $4.00). The stock's price is currently $29.50, its
dividend is expected to grow at a constant rate of 9% per year, its
tax rate is 25%, and its WACC is 15.60%. What percentage of the
company's capital structure consists of debt? Do not round
intermediate calculations. Round your...

Hook Industries's capital structure consists solely of debt and
common equity. It can issue debt at rd = 11%, and its
common stock currently pays a $4.00 dividend per share
(D0 = $4.00). The stock's price is currently $35.00, its
dividend is expected to grow at a constant rate of 8% per year, its
tax rate is 25%, and its WACC is 14.40%. What percentage of the
company's capital structure consists of debt? Do not round
intermediate calculations. Round your...

Hook Industries's capital structure consists solely of debt and
common equity. It can issue debt at rd = 10%, and its
common stock currently pays a $3.00 dividend per share
(D0 = $3.00). The stock's price is currently $32.50, its
dividend is expected to grow at a constant rate of 7% per year, its
tax rate is 25%, and its WACC is 13.65%. What percentage of the
company's capital structure consists of debt? Do not round
intermediate calculations. Round your...

Hook Industries's
capital structure consists solely of debt and common equity. It can
issue debt at rd = 8%, and its common stock currently
pays a $3.50 dividend per share (D0 = $3.50). The
stock's price is currently $22.25, its dividend is expected to grow
at a constant rate of 4% per year, its tax rate is 25%, and its
WACC is 12.20%. What percentage of the company's capital structure
consists of debt? Do not round intermediate calculations. Round
your...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 5 minutes ago

asked 7 minutes ago

asked 11 minutes ago

asked 29 minutes ago

asked 49 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago