A company's capital structure is as follows. Em 10 million £1 ordinary shares 10 Reserves 4 13% irredeemable loan stock 7--21-- Current market prices for the company s securities are as follows. £1 ordinary shares 280p 13% irredeemable loan stock £100 The company is paying corporation tax at a rate of 30%. The cost of the company's equity capital has been estimated at 12% per annum. The company's weighted average cost of capital for capital investment appraisal purposes is A. 11.42% B. 12.20% C . 11.03% D. 12.30%

A company's capital structure is as follows. Em 10 million £1 ordinary shares 10 Reserves 4 13% irredeemable loan stock 7--21-- Current market prices for the company s securities are as follows. £1 ordinary shares 280p 13% irredeemable loan stock £100 The company is paying corporation tax at a rate of 30%. The cost of the company's equity capital has been estimated at 12% per annum. The company's weighted average cost of capital for capital investment appraisal purposes is A. 11.42% B. 12.20% C . 11.03% D. 12.30%

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

See similar textbooks

Similar questions

The Capital Structure for the ABC Corp. is as follows: Preferred Stock $ 3,750 Common Stock $ 5,750 Bonds $ 15,500 The company has a 5.5% after tax cost of debt, a 12.75% cost of preferred stock and a 15.875% cost of common stock. What is the firm’s weighted average cost of capital?.
14 A. Assume Skyler Industries has debt of $4,377,783with a cost of capital of 9.7% and equity of $5,791,640 with a cost of capital of 6%. What is Skyler’s total weighted average cost of capital? Round to the nearest hundredth, two decimal places and submit the answer in a percentage
6
Weighted average cost of capital A. The capital for investment of Executive Consultants, Inc. is as follows: Sources of capital Capital Debt (corporate bonds) $4,100,000 Prefferent shares $2,200,000 Common shares $2,800,000 B. To generate the $ 4.1 million of corporate bond capital, they issued bonds at $ 965 par value, with an annual coupon of $ 100 for the next 10 years, with a flotation cost of $ 10 per bond.C. The issue of preferred shares has a cost of $ 5 per share and will pay a dividend of 10% of its par value of $ 110 per preferred share.D. The risk-free rate is 3.45% and the market return is 11.25%. The company's beta coefficient is 1.23.E. Executive Consultants, Inc. has a tax liability of 35%.Problems:You must submit the procedure and all the calculations.1. Determine the capital structure of Executive Consultants, Inc.2. Calculate the cost of debt after taxes.3. Calculate the cost of preferred equity.
What is the company's WACC if it has the following capital structure and 40% tax rate? 7.5% Market Value Required rate of return Bond $60,000,000 4% Preferred Stock $60,000,000 6% Common Stock $120,000,000 10% O 6.67% O 9.4% 7.1%
Question 5: The Holmes company's yearend balance sheet is shown below. Its cost of common equity is 12%, its before tax cost of debt is 12% and its marginal tax rate is 35%. Assume that the firm long term debt sells at par value. The firm total debt, which is the sum of the company short term debt and long term debt, equal $2820. The firm has 600 share of common stock outstanding that sells for $5.00 per share. Calculate Holmes WACC using market value weights. Assets Equities Cash 200 Account receivable 156 Equipment 5964 Total Assets 6320 Short term debts Long term debts Common equity Total Equities 520 2300 3500 6320
Intro Munich Re Inc. is expected to pay a dividend of $4.82 in one year, which is expected to grow by 4% a year forever. The stock currently sells for $69 a share. The before-tax cost of debt is 7% and the tax rate is 34%. The target capital structure consists of 20% debt and 80% equity. Part 1 What is the company's weighted average cost of capital? 3+ decimals Submit

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS