Question

The weighted average cost of capital for a company is least dependent upon the: A) company's...

The weighted average cost of capital for a company is least dependent upon the:

A) company's beta.

B) coupon rate of the company's outstanding bonds.

C) growth rate of the company's dividends.

D) company's marginal tax rate.

E) standard deviation of the company's common stock.

Why is the answer E instead of Coupon Rate B

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Answer is Option E

WACC is dependent on cost of equity and cost of debt.

Cost of Equity depends on company's beta (CAPM Model), growth rate of dividends (constant growth dividend discount model), so option A and C are not the answer.

Cost of debt depends on coupon rate (for yield) as well as marginal tax rate (for post tax cost of debt) so option B and D are incorrect.

Hence, answer is E. Standard deviation is the least probable factor that may cause change in WACC.

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:...
Calculate the weighted average cost of capital for a company given the following:       Dividend expected...
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...
Based upon the following facts calculate the Weighted Average Cost of Capital (WACC) for Student Success...
Based upon the following facts calculate the Weighted Average Cost of Capital (WACC) for Student Success Corporation (SSC): PART 1 – WACC Tax rate = 40% Debt Financing: $10,000 Face Value 10-Year, 5% Coupon, Semiannual Non-Callable Bonds Selling for $11,040 New bonds will be privately placed with no flotation cost. Common Stock: Current Price $40; Current Dividend = $3.00 and Growth Rate = 5%. Common Stock: Beta = 1.1; Risk Free Rate 2.0%; Required Return of the Market 7% Capital...
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...
What would Lyft Inc (LYFT)'s weighted-average cost of capital with this capital structure: 150 million shares...
What would Lyft Inc (LYFT)'s weighted-average cost of capital with this capital structure: 150 million shares of common stock with a market price of $72. Lyft's beta is .9. The current risk-free rate is 2.5% and the equity market risk premium is 5%. 60 million shares of preferred stock with a current price of $75 that pays $4 annual dividends. 5 million bonds with a 5% annual coupon rate (2.5% paid semi-annually), a 4% yield to maturity, with 20 years...
Given the following information for Jano Corp., find the Weighted Average Cost of Capital (WACC). Assume...
Given the following information for Jano Corp., find the Weighted Average Cost of Capital (WACC). Assume the company's tax rate is 35%.   Bonds: 10,000 8% coupon bonds outstanding, $1,000 par value, 20 years to maturity, currently selling for $980; the bonds make semi-annual payments Common Shares: 300,000 shares outstanding, selling for $50 a share; the beta is 1.25 Preferred Shares: 25,000 shares of 5% preferred stock outstanding with a $100 par value, currently selling for $75 per share. The market...
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...
Corporation wants to determine its current market value weighted-average cost of capital. The market value of...
Corporation wants to determine its current market value weighted-average cost of capital. The market value of the firm's bonds is $1.5 million and the bond yield is 12.00%. Company has 125,000 shares of common stock outstanding and the current market price is $40 per share. The firm's tax rate is 30% and its beta is 1.2. The U.S. T-bill rate of return is 6.00% and the total market index rate of return is 11.00%. What is Company's market value weighted-average...
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...
XYZ Company's weighted average cost of capital is 9%. If the weights and costs are as...
XYZ Company's weighted average cost of capital is 9%. If the weights and costs are as follows, what would be the cost of preferred stock? Weights Cost: Common Stock 35% 14% Preferred Stock 15% ? Debt 50% 9% Tax rate 21%
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT