Question

Assume the company has weight of debt WD = 80%, cost of debt RD = 15%,...

Assume the company has weight of debt WD = 80%, cost of debt RD = 15%, for un-leveraged firm: Bu =1; the company has Tax Rate = 40%, risk-free rate Rf = 4%, Market Return = 10%, free cash flow FCF0 = 200 million, growth rate g = 4%. Use the following formula for beta of leveraged company: B = Bu [1+ (1-T) × (WD /WS)], What is the WACC and what is the value of the firm?

Please show work

Homework Answers

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Assumption: WD = 60%, RD = 14%, for unleveraged firm: Bu =1; Tax Rate=35%, Rf= 5%,...
Assumption: WD = 60%, RD = 14%, for unleveraged firm: Bu =1; Tax Rate=35%, Rf= 5%, Market Return Premium = 6%, FCF0 = 250 million, g=3%. Use the formula B = Bu [1+ (1-T) × (Wd /Ws)], What is the WACC and what is the value of the firm? ********PLUS SHOW ALL WORK THANK YOU!!!********
4. Tri Co. has the following cost of debt structure: wd 0% 20% 30% 40% 50%...
4. Tri Co. has the following cost of debt structure: wd 0% 20% 30% 40% 50% rd 0.0% 10.0% 12.0% 14.0% 15.0% The market risk premium is 7%, the risk free rate is 4%, beta of unleveraged firm is 1.10, Hamada’s equation b= bU [1 + (1 - T)(wd/we)]. Tax rate T = 35%. Please use the above information to answer following questions: a. If the firm uses 40% debt, what is the cost of equity of the firm, based...
Tri Co. has the following cost of debt structure: The market risk premium is 4.5%, the...
Tri Co. has the following cost of debt structure: The market risk premium is 4.5%, the risk free rate is 5%, beta of unleveraged firm is 1.20, Hamada’s equation b= bU [1 + (1 - T)(wd/we)]. T=40%. Please use the above information to answer following questions: wd 0% 20% 30% 40% 50% rd 0.0% 9.0% 10.0% 11.0% 12.0% If the firm uses 50% debt, what is the cost of equity of the firm, based on CAPM model? Cost of Equity...
Before-tax cost of debt (B-T rd) 8% Tax rate 34% Net Price of Preferred stock (after...
Before-tax cost of debt (B-T rd) 8% Tax rate 34% Net Price of Preferred stock (after deducting floatation costs) $32.00 Dividend per share of Preferred $3.40 Current price of Common stock stock $52.00 Dividend paid in the recent past for Common $2.50 Growth rate 6% Stock Beta 0.81 Market risk premium, (MRP) 6.2% Risk free rate ( rf ) 5.5% Flotation cost for common stock 5% Weight of debt in the target capital structure 40% Weight of preferred stock in...
A firm has $50 million in 10-year debt with a YTM of 9% and a coupon...
A firm has $50 million in 10-year debt with a YTM of 9% and a coupon of 10% ang thus selling at premium of $64.18 It also has 200,000 shares of preferred stock with a $4 dividend that sells for $90 a share and common stockwith a book value of $80 million and a par value of $5 a shre that sells for $50 a share. The common stock pays a dividend of $4 which is expected to grow at...
Beckman Engineering and Associates (BEA) is considering a change in its capital structure. BEA currently has...
Beckman Engineering and Associates (BEA) is considering a change in its capital structure. BEA currently has $20 million in debt carrying a rate of 8%, and its stock price is $40 per share with 2 million shares outstanding. BEA is a zero-growth firm and pays out all of its earnings as dividends. The firm’s EBIT is $16 million, and it faces a 25% federal-plus-state tax rate. The market risk premium is 4%, and the risk-free rate is 6%. BEA is...
Suppose that you have following information about the company: - The company has 2 billion shares...
Suppose that you have following information about the company: - The company has 2 billion shares outstanding - The market value of its debt is € 4 billion - The free cash flow to the firm is currently € 1.2 billion - The equity beta is 0.9; the equity (market) risk premium is 7.5%; the risk-free rate is 3.5% - The before-tax cost of debt is 7% - The tax rate is 20% - The company is currently and in...
Vandelay Industries is considering four average risk projects with information below related to their rates of...
Vandelay Industries is considering four average risk projects with information below related to their rates of return. Determine Vandelay Industries' WACC. INPUTS USED IN THE MODEL Tax rate 30% B-T rd 8% Net Pps $35.00 Dps $5.00 P0 $50.00 D1 $2.50 g 5% Vandelay's beta 1.1 Market risk premium, RPM 7.50% Risk free rate, rRF 3.0% Target capital structure from common stock 60% Target capital structure from preferred stock 15% Target capital structure from debt 25% Calculate the cost of...
Company XYZ has a target capital structure of 20 percent debt and 80 percent equity. Its...
Company XYZ has a target capital structure of 20 percent debt and 80 percent equity. Its bonds pay an average 6 percent coupon (semi-annual payout), mature in 7 years, and sell for $1049.54 per $1,000 in face value. The company stock beta is 1.02 versus the market. The risk-free rate of interest is 4 percent and the market risk premium is 6 percent. The company is a mature, constant growth firm that just paid a dividend (D0) of $2.57 and...
Beckman Engineering and Associates (BEA) is considering a change in its capital structure. BEA currently has...
Beckman Engineering and Associates (BEA) is considering a change in its capital structure. BEA currently has $20 million in debt carrying a rate of 8%, and its stock price is $40 per share with 2 million shares outstanding. BEA is a zero growth firm and pays out all of its earnings as dividends. The firm's EBIT is $13.516 million, and it faces a 30% federal-plus-state tax rate. The market risk premium is 4%, and the risk-free rate is 5%. BEA...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT