All-Canadian, Ltd., is a multiproduct company with three divisions: Pacific Division, Plains Division, and Atlantic Division. The company has two sources of long-term capital: debt and equity. The interest rate on All-Canadian's $408 million debt is 9 percent, and the company's combined federal and state income tax rates amount to 30 percent. The cost of All-Canadian's equity capital is 12 percent. Moreover, the market value of the company's equity is $527 million. (The book value of All-Canadian's equity is $438 million, but that amount does not reflect the current value of the company's assets or the value of intangible assets.) The following data (in millions) pertain to All-Canadian's three divisions. Before-Tax Operating Income Division Pacific Plains Atlantic $19 48 51 Current Liabilities. $5 Total Assets $ 64 % 300 494 Required: 1. Compute All-Canadian's weighted-average cost of capital (WACC). (Do not round intermediate calculations. Round your final answer to 2 decimal places (i.e., .1234 should be entered as 12.34).) Weighted-average cost of capital
All-Canadian, Ltd., is a multiproduct company with three divisions: Pacific Division, Plains Division, and Atlantic Division. The company has two sources of long-term capital: debt and equity. The interest rate on All-Canadian's $408 million debt is 9 percent, and the company's combined federal and state income tax rates amount to 30 percent. The cost of All-Canadian's equity capital is 12 percent. Moreover, the market value of the company's equity is $527 million. (The book value of All-Canadian's equity is $438 million, but that amount does not reflect the current value of the company's assets or the value of intangible assets.) The following data (in millions) pertain to All-Canadian's three divisions. Before-Tax Operating Income Division Pacific Plains Atlantic $19 48 51 Current Liabilities. $5 Total Assets $ 64 % 300 494 Required: 1. Compute All-Canadian's weighted-average cost of capital (WACC). (Do not round intermediate calculations. Round your final answer to 2 decimal places (i.e., .1234 should be entered as 12.34).) Weighted-average cost of capital
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 following information applies to the questions displayed below.]
All-Canadian, Ltd., is a multiproduct company with three divisions: Pacific Division, Plains Division, and
Atlantic Division. The company has two sources of long-term capital: debt and equity. The interest rate on
All-Canadian's $408 million debt is 9 percent, and the company's combined federal and state income tax
rates amount to 30 percent. The cost of All-Canadian's equity capital is 12 percent. Moreover, the market
value of the company's equity is $527 million. (The book value of All-Canadian's equity is $438 million, but
that amount does not reflect the current value of the company's assets or the value of intangible assets.)
The following data (in millions) pertain to All-Canadian's three divisions,
Before-Tax
Operating
Income
$19
48
51
Division
Pacific
Plains
Atlantic
Current
Liabilities
Weighted-average cost of capital
$5
4
8
Total
Assets
$ 64
%
Check my work
300
494
Required:
1. Compute All-Canadian's weighted-average cost of capital (WACC). (Do not round intermediate calculations. Round your
final answer to 2 decimal places (i.e., .1234 should be entered as 12.34).)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe3a74b4d-94d5-4efa-a2b6-25f8cd8a9b81%2F048ca0c0-4610-463d-95e5-dbe5131c1586%2Flhabe1_processed.jpeg&w=3840&q=75)
Transcribed Image Text:[The following information applies to the questions displayed below.]
All-Canadian, Ltd., is a multiproduct company with three divisions: Pacific Division, Plains Division, and
Atlantic Division. The company has two sources of long-term capital: debt and equity. The interest rate on
All-Canadian's $408 million debt is 9 percent, and the company's combined federal and state income tax
rates amount to 30 percent. The cost of All-Canadian's equity capital is 12 percent. Moreover, the market
value of the company's equity is $527 million. (The book value of All-Canadian's equity is $438 million, but
that amount does not reflect the current value of the company's assets or the value of intangible assets.)
The following data (in millions) pertain to All-Canadian's three divisions,
Before-Tax
Operating
Income
$19
48
51
Division
Pacific
Plains
Atlantic
Current
Liabilities
Weighted-average cost of capital
$5
4
8
Total
Assets
$ 64
%
Check my work
300
494
Required:
1. Compute All-Canadian's weighted-average cost of capital (WACC). (Do not round intermediate calculations. Round your
final answer to 2 decimal places (i.e., .1234 should be entered as 12.34).)
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