A company has the following target capital structure and costs: Capital structure Cost of capital Debt 30% 10% Common stock 60% 12% Preferred stock 10% 10% The company's marginal tax rate is 30%. What is the company's weighted-average cost of capital? Group of answer choices 10.30% 7.84% 9.30% 11.20%
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58
A company has the following target capital structure and costs:
|
Capital structure |
Cost of capital |
Debt |
30% |
10% |
Common stock |
60% |
12% |
|
10% |
10% |
The company's marginal tax rate is 30%. What is the company's weighted-average cost of capital?
Group of answer choices
10.30%
7.84%
9.30%
11.20%
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- The basic WACC equation The calculation of a weighted average cost of capital (WACC) involves calculating the weighted average of the required rates of return on debt and equity, where the weights equal the percentage of each type of financing in the firm’s overall capital structure. what is the symbol that represents the cost of preferred stock in the weighted average cost of capital (WACC) equation.__________ Bob Co. has $1.26 million of debt, $3.16 million of preferred stock, and $2.02 million of common equity. The appropriate weight of the firm's preferred stock in the calculation of the company's weighted average cost of capital is____________% .K Calculation of individual costs and WACC Dillon Labs has asked its financial manager to measure the cost of each specific type of capital as well as the weighted average cost of capital. The weighted average cost is to be measured by using the following weights: 35% long-term debt, 15% preferred stock, and 50% common stock equity (retained earnings, new common stock, or both). The firm's tax rate is 29%. Debt The firm can sell for $1025 a 12-year, $1,000-par-value bond paying annual interest at a 7.00% coupon rate. A flotation cost of 2.5% of the par value is required. Preferred stock 9.00% (annual dividend) preferred stock having a par value of $100 can be sold for $96. An additional fee of $5 per share must be paid to the underwriters. Common stock The firm's common stock is currently selling for $60 per share. The stock has paid a dividend that has gradually increased for many years, rising from $2.70 ten years ago to the $4.40 dividend payment, Do, that the company just recently…If the return on asset (ROA) is 10%, the pre-tax cost of debt is 8%, and the corporate tax rate is 20%. What will the return on equity (ROE) be if the capital structure is 60% equity and 40% debt? Group of answer choices 10% 13.6% 9% 12.4%
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- Question 13 (Group 12 & Group 4 [Acc]) Assume that in the optimal capital structure: wD = 40%, wC = 50%, wP = 10%. Of the 50% that comes from common stock 80% will be generated internally through retained earnings; 20% through newly issued equity. Now we just have to estimate the costs of the individual funding sources, the rates. The marginal corporate tax rate is 30%. Use the following information to find rates: If new debt were issued it would have a coupon rate of 9%, a maturity of 10 years, and a face value of Tshs 1,000. It is expected that since investor's opportunity cost is also 9%, that the new debt could be sold at face value. Issue costs are Tshs 30/share. ii. Newly issued preferred stock would have a par value of Tshs 50, a dividend of Tshs 6/share, and flotation costs of Tshs 1.75/share. Assume that this newly issued preferred stock would be issued at par. i. The firm just issued a Tshs 5 dividend. Dividends are expected to grow at a rate of 10%/year, indefinitely. The…Calculation of individual costs and WACC: Dillon Labs has asked its financial manager to measure the cost of each specific type of capital as well as the weighted average cost of capital. The weighted average cost is to be measured by using the following weights: 35% long-term debt, 10% preferred stock, and 55% common stock equity (retained earnings, new common stock, or both). The firm's tax rate is 28%. debt The firm can sell for $1010 a 14-year, $1,000-par-value bond paying annual interest at a 7.00% coupon rate. A flotation cost of 2.5% of the par value is required. Preferred stock 7.00% (annual dividend) preferred stock having a par value of $100 can be sold for $88. An additional fee of$4 per share must be paid to the underwriters. Common stock The firm's common stock is currently selling for $70 per share. The stock has paid a dividend that has gradually increased for many years, rising from $2.25 ten years ago to the $3.67 dividendpayment, D0, that…37. A company's annual cost of equity is 10 percent per year, the yield to maturity on its debt is 5 percent, and its marginal corporate tax rate is 40 percent. The firm has a market value of $500 million in equity and $500 million in debt. What is the company's after-tax weighted average cost of capital? A. 6.0% B. 6.5% C. 7.5% D. 10.0% 38. Which of the following is a potential use of blockchain technology? A. Developing product recommendations based on user online activity. B. Creating online videos C. Encrypting large volumes of data D. Tracking banking transactions