Finance 6.67 ptsA company's capital structure consists of 40% debt and 60% equity. The yield on this company's bonds is currently 8.75%. The betaof this company is 0.75, the risk-free rate is 4.5% and the expected return on the market is 12.5%. The tax rate of this company is21%. What is the WACC for this company?O 11.66%O 15.08%O 10.18%O 9.07%13.94%

Step 1: Calculate the cost of debt:After-tax cost of debt: Debt interest rate (yield) needs to be…

Answered: 6.67 pts A company's capital structure…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter12: The Cost Of Capital

Section: Chapter Questions

Problem 7P

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Company Y has a target debt ratio of 55%. Currently its debt ratio is 60% and it expects to revert to the target ratio in the near future. The company has a market cost of equity of 20%. While it has no bonds, it has interest payments of R1 000 000 on liabilities of R10 000 000. Assume the tax rate is 27%. What is the WACC for the company? a. 6.36% b. 14.05% c. 13.02% d. 9.10%
6. a firm has 5% cost of debt and 10% cost of equity. Market value for bonds is $20m, and $80m for equity. Assuming a 40% tax rate, what is the WACC? 8.72% 9.2% 8.6% 9.0%
Company Y has a target debt ratio of 55%. Currently its debt ratio is 60% and it expects to revert to the target ratio in the near future. The company has a market cost of equity of 20%. While it has no bonds, it has interest payments of R1 000 000 on liabilities of R10 000 000. Assume the tax rate is 28%. What is the WACC for the company? Ⓒa. 6.36% b. 9.00% c. 12.33% d. 12.96%
Assume JUP has debt with a book value of $19 million, trading at 120% of par value. The bonds have a yield to maturity of 5%. The firm has book equity of $18 million, and 2 million shares trading at $19 per share. The firm's cost of equity is 10%. What is JUP's WACC if the firm's marginal tax rate is 35%? ..... А. 8.22% В. 7.84% С. 5.98% D. 7.47%
Mf2.
Company Y has a target debt to equity ratio of 50%. Currently its book debt to equity ratio is 60% and it expects to revert to the target ratio very soon. The company has an after-tax market cost of debt of 9% and a market cost of equity of 20%. What is the WACC for the company? a. 14.33% b. 13.50% c. 12.33% d. 16.51%
Company X has a debt to equity ratio equal to 1 and a beta equal to 2. The risk free rate is 2% and the market risk premium is 3%. The yield to maturity on the company’s bonds is 4% and the corporate tax rate is 25%. What is X’s cost of capital? 8% 6.5% 5.5% 3.5%
A company has $5 million in debt outstanding with a coupon rate of 12%. Currently, the yield to maturity (YTM) on these bonds is 14%. If the firm's tax rate is 40%, what is the company's after-tax cost of debt? О А. 7.2% В. 8.4% С. 8.6% D. 10.8%
Answer
Financial Accounting
K SIROM Scientific Solutions has $10 million of outstanding equity and $5 million of bank debt. The bank debt costs 5% per year. The estimated equity beta is 2. If the market risk premium is 8% and the risk-free rate is 5%, compute the weighted average cost of capital if the firm's tax rate is 30%. OA. 15.17% OB. 17.44% O C. 15.93% OD. 16.68% ...
Take It All Away has a cost of equity of 10.45 percent, a pretax cost of debt of 5.21 percent, and a tax rate of 21 percent. The company's capital structure consists of 65 percent debt on a book value basis, but debt is 25 percent of the company's value on a market value basis. What is the company's WACC? Multiple Choice ● O O O 9.14% 8.17% 12.39% 9.75% 8.87%

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