SSX Ltd has 5 million shares of common stock outstanding, 2 million shares of preferred stock outstanding, and 100,000 bonds (face value $1,000). The common shares are selling for $25 per share, the preferred shares are selling for $10 per share, and the bonds are selling for 101% of par. The cost of equity is 20%. The cost of preference shares is 15% and the cost of debt is 10%, with the tax rate being 20%. What is SSX's WACC? O 15.9% 14.7% 12.5% 15.5%

SSX Ltd has 5 million shares of common stock outstanding, 2 million shares of preferred stock outstanding, and 100,000 bonds (face value $1,000). The common shares are selling for $25 per share, the preferred shares are selling for $10 per share, and the bonds are selling for 101% of par. The cost of equity is 20%. The cost of preference shares is 15% and the cost of debt is 10%, with the tax rate being 20%. What is SSX's WACC? O 15.9% 14.7% 12.5% 15.5%

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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The Paulson Company's year-end balance sheet is shown below. Its cost of common equity is 15%, its before-tax cost of debt is 12%, and its marginal tax rate is 25%. Assume that the firm's long-term debt sells at par value. The firm’s total debt, which is the sum of the company’s short-term debt and long-term debt, equals $1,136. The firm has 576 shares of common stock outstanding that sell for $4.00 per share. Assets Liabilities And Equity Cash $ 120 Accounts payable and accruals $ 10 Accounts receivable 240 Short-term debt 56 Inventories 360 Long-term debt 1,080 Plant and equipment, net 2,160 Common equity 1,734 Total assets $2,880 Total liabilities and equity $2,880 Calculate Paulson's WACC using market-value weights. Do not round intermediate calculations. Round your answer to two decimal places. %
The company Nexti AS has 2 million shares outstanding with a market price of NOK 30 per share and with an equiry beta equal to 1.5. The book value of equity is NOK 40 million. The company also has NOK 70 million in long-term debt, the debt beta is equal to zero. Risk-free interest rate is 3% and the market risk premium is 7%. The company pays 30% income tax. (There is nobody investor tax, Se=Sk=0) a) What would the value of the company be worth if it were 100% equity financed? b) What would the company's cost of equity be if the company is financed with 100% equity?
Umbrella Corp.'s common stock currently is selling at $23 per share. There are 180,000\\noutstanding shares of common stock. Umbrella Corp also has 50,000 outstanding preferred\\nshares that are currently selling at $35 per share. Umbrella Corp also has issued 5,000 bonds\\nwhich are each currently selling at $968. The cost of capital for Umbrella Corp. is 13% for its\\ncommon stock, 10% for its preferred shares, and 8% for its bonds. Given it has a tax rate of 30%, \ \nwhat is Umbrella Corp.'s adjusted weighted-average cost of capital?
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%
Dickson Corporation is comparing two different capital structures. Plan I would result in 39,000 shares of stock and $108,000 in debt. Plan II would result in 33,000 shares of stock and $ 324,000 in debt. The interest rate on the debt is 7 percent. Assume that EBIT will be $160,000. An all-equity plan would result in 42, 000 shares of stock outstanding. Ignore taxes. What is the price per share of equity under Plan I? Plan II? (Do not round intermediate calculations and round your answers to 2 decimal places, e. g., 32.16.)

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