24. Roomz Hotels plc currently has 40 million shares outstanding trading at $2.50 each. The firm has just paid a dividend of $0.10. Roomz also has 2 million bonds, which are trading at $110 each with a yield to maturity of 5%. It is expected that dividends will grow by a constant 4% per annum. Roomz faces a corporate taxation rate of 20%. What is Roomz Hotels' weighted average cost of capital (WACC)? a. 3.7% b. 5.3% c. 6.0% d. 7.2% e. None of the above

24. Roomz Hotels plc currently has 40 million shares outstanding trading at $2.50 each. The firm has just paid a dividend of $0.10. Roomz also has 2 million bonds, which are trading at $110 each with a yield to maturity of 5%. It is expected that dividends will grow by a constant 4% per annum. Roomz faces a corporate taxation rate of 20%. What is Roomz Hotels' weighted average cost of capital (WACC)? a. 3.7% b. 5.3% c. 6.0% d. 7.2% e. None of the above

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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c) Plummer Premium Products Ltd has 13 million shares in issue at a current market price of $12.50 per share. The company's equity beta is 1.05, the riskfree rate of return is 3% and the market risk premium is 6%. The company has $50 million nominal 7% debt with four years to maturity which is trading at face value. If the company's tax rate is 32%, calculate the after tax weighted average cost of capital for the company.
Bulldogs Inc. has a capital structure that consists of 20% equity and the rest with debt. The company expects to report P3 million in net income this year, and 40% of the net income will be paid out to shareholders as dividends. How large must the firm’s capital budget be this year without it having to issue any fresh common shares? P1.51 million P9.0 million P0.24 million P12.00 million
Canon Corporation. has a market value of its debts of $350 millions with 8% cost of debt. Currently, there are 10 million shares outstanding, each traded at $60. If the company has an 10% tax rate, the risk-free rate is 3% and the expected return on the market portfolio is 10%, calculate the Weighted Average Cost of Capital (WACC). Note that Canon Corporation has a market risk of 1.3 (beta).
Shi Import-Export's balance sheet shows $300 million in debt, $50 million in preferred stock, and $250 million in total common equity. Shi's tax rate is 25%, rd = 6%, rps = 9.1%, and rs = 12%. If Shi has a target capital structure of 30% debt, 5% preferred stock, and 65% common stock, what is its WACC? Round your answer to two decimal places.
A firm has a bank loan with a 10% interest rate. The firm also has in issue 8% preference shares trading at nominal value and has estimated that its cost of ordinary shares is 18%. The firm has a 30% tax rate. What is the weighted average cost of capital if the firm uses a capital structure comprising 50% debt and an even split between preference and ordinary shares?
Swift plc has 10,000 shares. The current share price is £40, and the cost of equity is 13%. The company has also 1,000 bonds outstanding, with 13 years to maturity, a coupon rate of 8% and a face value of £1,000. The bonds make semiannual coupon payments and the current price is £856.25 per bond. The tax rate is 20%. What is the weighted average cost of capital (WACC) of the company? Select one: a. 9.5% b. None of these answers is correct. c. 9.4% d. 9.7% e. 9.6%
Chella Vibes Industries capital structure consists solely of debt and common equity. It can issue debt at 11%, and its common stock paid a dividend of $1.50. The stock’s price is currently $22.30, its dividend is expected to grow at a constant rate of 5% per year, its tax rate is 40%, and its WACC is 10.56%. What percentage of the company’s capital structure consists of debt and common equity (ie: what are the weights of debt and common equity)?
10
Time Warner shares have a market capitalization of $55 billion. The company just paid a dividend of $0.35 per share and each share trades for $35. The growth rate in dividends is expected to be 6.5% per year. Also, Time Warner has $20 billion of debt that trades with a yield to maturity of 7%. If the firm's tax rate is 30%, compute the WACC?
A firm has cash flow from operations of $138 million and needs $125 million for investment purposes, leaving $13 million of free cash flow. Assume the firm has 13 million shares outstanding and its shares are presently trading at $41 per share. How much would it pay out in dividends per share if the firm used 20% debt financing and the firm followed a strict residual dividend policy? $3.65 per share $2.92 per share $1.05 per share $3.25 per share
9
Mitsu Corporation has 100,000 shares of common stock outstanding. The stock currently sells for $50 per share and has a beta of 1.8. The firm has $4 million debt outstanding. The cost of debt before tax is 6.5%. The market risk premium is 7%. T- bills are yielding 4%. Tax rate is 35%. What is the weighted average cost of capital (WACC) of the firm? A) 9.07% O B) 11.10% C) 9.93% D) 11.50% E) 10.36%

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