Anne Hathaway Inc.'s common stock has 10,800 shares outstanding with $42 pershare. The company's preferred stock has 245 shares outstanding with $93 pershare. It also has 580 bonds outstanding with a coupon rate of 6.5% paidsemiannually and a maturity of 25 years. Each bond sells for $1,050 in the market.The capital structure weight of the preferred stock is.5611.0210O.0977.4179.0663

To determine the capital structure weight of the preferred stock, we need to calculate the market…

Answered: Anne Hathaway Inc.'s common stock has…

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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1) Bombay Inc has 8.5 million shares of common stock outstanding, 250,000shares of 5% preferred stock outstanding, and 135,000 7.5% semi-annualbonds outstanding, par value $1000 EACH. The common stock currently sellsfor $34 per share and has a beta of 1.25, the preferred stock currently sells for$91 per share, and the bonds have 15 years to maturity and sell for 114% ofpar. The market risk premium is 7.5%, T-bills are yielding 4%, and thecompany’s tax rate is 35%.a) Calculate the firm’s market value capital structure.b) Calculate the company WACCc) If Bombay Inc generates a 7.5% with this capital, is Bombay Incdestroying or adding value discuss.
Phillips Equipment has 6,500 bonds outstanding that are selling at 96.5 percent of par. Bonds with similar characteristics are yielding 6.7 percent, pretax. The company also has 48,000 shares of 5.5 percent preferred stock and 75,000 shares of common stock outstanding. The preferred stock sells for $64 per share. The common stock has a beta of 1.32 and sells for $41 per share. The preferred stock has a stated value of $100. The U.S. Treasury bill is yielding 2.2 percent and the return on the market is 10.6 percent. The corporate tax rate is 21 percent. What is the weighted average cost of capital? O 8.09% O 8.64% O 10.18% O 10.56% AMoving to another question will save this response. «< Question 29 of 30
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Lingenburger Cheese Corporation has 6.2 million shares of common stock outstanding, 316,000 shares of 4.55 percent preferred stock outstanding, par value of $100, and 69,000 5.6 percent semiannual bonds outstanding, par value $2,000 each. The common stock currently sells for $73.95 per share and has a beta of 1.16, the preferred stock currently sells for $101.20 per share, and the bonds have 21 years to maturity and sell for 95.7 percent of par. The market risk premium is 6.6 percent, T-bills are yielding 3.2 percent, and the firm's tax rate is 23 percent. What is the firm's market value capital structure? Note: Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616. Market value weight of debt Market value weight of preferred stock Market value weight of equity What is the firm's cost of each form of financing? Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. Aftertax cost…
Pandora Manufacturing has 9 million shares of common stock outstanding. The current share price is $81, and the book value per share is $8. The company also has two bond issues outstanding. The first bond issue has a face value of $80 million and a coupon rate of 10 percent and sells for 96 percent of par. The second issue has a face value of $50 million and a coupon rate of 11 percent and sells for 104 percent of par. The first issue matures in 25 years, the second in 8 years. a. What are the company's capital structure weights on a book value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.) b. What are the company's capital structure weights on a market value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.) c. Which are more relevant, the book or market value weights? a. Equity/Value Debt/Value b. Equity/Value Debt/Value More relevant C.
The JIRAF Company has 1700 bonds outstanding that have a market price of $1200 each and a face value of $1000. floatation cost is 0.015 the bond pays coupon of 0.055 quarterly for 11 years. The company also has 6,00 shares of preferred stock at a market price of $40 and dividends 1.5 each par value 20 dollars. The common stock is priced at $29 a share it is undervalued by $1.5 and there are 70000 shares outstanding, par value is 5 dollars the stock paid this year $1.1 and will continue to grow at a rate of 0.035 TAXES ARE 0.25 what is the cost of debt after tax? what is the cost of PS what is the cost of common stock? what is the weight of the bond according to book value method what is the weight of the stock according to book value method what is the weight of preferred stock according to book value method what is the weight of preferred stock according to book value method
Dineage Corporation has 5 million shares of common stock outstanding. The current share price is $84, and the book value per share is $7. The company also has two bond issues outstanding. The first bond issue has a face value of $60 million, has a 7 percent coupon, and sells for 94 percent of par. The second issue has a face value of $35 million, has a 8 percent coupon, and sells for 107 percent of par. The first issue matures in 22 years, the second in 4 years. The most recent dividend was $5.6 and the dividend growth rate is 8 percent. Assume that the overall cost of debt is the weighted average of that implied by the two outstanding debt issues. Both bonds make semiannual payments. The tax rate is 35 percent. What is the company's WACC?
Ahmed Company has 8.5 million shares of common stock outstanding, 250,000 shares of 5 percent preferred stock outstanding, and 135,000 7.5 percent semiannual bonds outstanding, par value $5,000 each. The common stock currently sells for $34 per share (Par value= $10) and has a beta of 1.25, the preferred stock currently sells for $91 per share, and the bonds have 15 years to maturity and sell for 114 percent of par. The market risk premium is 7.5 percent, T-bills are yielding 4 percent, and Ahmed Company tax rate is 36 percent. a. What is the firm's market value capital structure? b. If Ahmed Company is evaluating a new investment project that has the same risk as the firm's typical project, what rate should the firm use to discount the project's cash flows? If we use debt 35%, preferred stock 15% and common stock 50%, what will be the discount rate by assuming same cost of each financing?
Florida Manufacturing has 7.3 million shares of common stock outstanding. The current share price is $43, and the book value per share is $3. Filer Manufacturing also has two bond issues outstanding. The first bond issue has a face value of $68.0 million and a coupon rate of 6.0 percent and sells for 109.3 percent of par. The second issue has a face value of $58.0 million and a coupon rate of 6.5 percent and sells for 106.9 percent of par. The first issue matures in 7 years, the second in 28 years. Suppose the company’s stock has a beta of 1.4. The risk-free rate is 2.1 percent, and the market risk premium is 6.0 percent. Assume that the overall cost of debt is the weighted average implied by the two outstanding debt issues. Both bonds make semiannual payments. The tax rate is 34 percent. What is the company’s WACC? (Do not round intermediate calculations and round your answer to 2 decimal places. (e.g., 32.16))
Dani Corporation has 5 million shares of common stock outstanding. The current share price is $65, and the book value per share is $4. The company also has two bond issues outstanding. The first bond issue has a face value of $50 million, has a coupon rate of 5 percent, and sells for 90 percent of par. The second issue has a face value of $35 million, has a coupon rate of 4 percent, and sells for 102 percent of par. The first issue matures in 20 years, the second in 5 years. Both bonds make semiannual coupon payments. a. What are the company's capital structure weights on a book value basis? Note: Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616. b. What are the company's capital structure weights on a market value basis? Note: Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616. c. Which are more relevant, the book or market value weights? a. Equity/Value Debt/Value b. Equity/Value Debt/Value c.…
Filer Manufacturing has 5,321,196 shares of common stock outstanding. The current share price is $52.83, and the book value per share is $9.19. Filer Manufacturing also has two bond issues outstanding. The first bond issue has a face value of $43,973,360, has a 0.05 coupon, matures in 12 years and sells for 93 percent of par. The second issue has a face value of $50,007,464, has a 0.07 coupon, matures in 20 years, and sells for 89 percent of par. What is Filer's weight of debt on a market value basis? Enter the answer with 4 decimals (e.g. 0.2345)
Filer Manufacturing has 4,308,744 shares of common stock outstanding. The current share price is $42.19, and the book value per share is $9.71. Filer Manufacturing also has two bond issues outstanding. The first bond issue has a face value of $46,309,431, has a 0.08 coupon, matures in 8 years and sells for 82 percent of par. The second issue has a face value of $41,779,016, has a 0.06 coupon, matures in 20 years, and sells for 80 percent of par. What is Filer's weight of debt on a market value basis? Enter the answer with 4 decimals (e.g. 0.2345)

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