Assume that you have been hired as a consultant by CGT, a major producer of chemicals and plastics, including plastic grocery bags, styrofoam cups, and fertilizers, to estimate the firm's weighted average cost of capital. The balance sheet and some other nformation are provided below. Assets Current assets $38.000.000 Net plant, property, and equipment $101,000.000 Total assets S139.000.000 Liabilities and Equity Accounts payable $10.000.000 Accruals Current liabilities $9.000.000 $19.000.000 Long-term debt (40,000 bonds, $1,000 par value) Total liabilities $40.000.000 $59.000.000 Common stock (10.000.000 shares) Retained earnings Total shareholders' equity Total liabilities and shareholders' equity $30.000,000 $50.000.000 $80.000.000 $139.000.000 The stock is currently selling for $15.25 per share, and its noncallable $1,000.00 par value, 20-year, 9.00% bonds with semiannual payments are selling for $930.41. The beta is 1.22, the yield on a 6-month Treasury bill is 3-5o%, and the yield on a 20-year Treasury bond is 5-50%. The required return on the stock market is 11.50%, but the market has had an average annual return of 14.50% during the past 5 years. The firm's tax rate is 25%. What is the best estimate of the firm's WACC? Do not round your
Assume that you have been hired as a consultant by CGT, a major producer of chemicals and plastics, including plastic grocery bags, styrofoam cups, and fertilizers, to estimate the firm's weighted average cost of capital. The balance sheet and some other nformation are provided below. Assets Current assets $38.000.000 Net plant, property, and equipment $101,000.000 Total assets S139.000.000 Liabilities and Equity Accounts payable $10.000.000 Accruals Current liabilities $9.000.000 $19.000.000 Long-term debt (40,000 bonds, $1,000 par value) Total liabilities $40.000.000 $59.000.000 Common stock (10.000.000 shares) Retained earnings Total shareholders' equity Total liabilities and shareholders' equity $30.000,000 $50.000.000 $80.000.000 $139.000.000 The stock is currently selling for $15.25 per share, and its noncallable $1,000.00 par value, 20-year, 9.00% bonds with semiannual payments are selling for $930.41. The beta is 1.22, the yield on a 6-month Treasury bill is 3-5o%, and the yield on a 20-year Treasury bond is 5-50%. The required return on the stock market is 11.50%, but the market has had an average annual return of 14.50% during the past 5 years. The firm's tax rate is 25%. What is the best estimate of the firm's WACC? Do not round your
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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Transcribed Image Text:a. 11.09%
b. 11.75%
c. 12.23%
d. 9.69%
e. 9.65%
Transcribed Image Text:Assume that you have been hired as a consultant by CGT, a major producer of chemicals and plastics, including plastic grocery bags, styrofoam cups, and fertilizers, to estimate the firm's weighted average cost of capital. The balance sheet and some other
information are provided below.
Assets
Current assets
$38,000,000
Net plant, property, and equipment
$101,000,000
Total assets
$139,000,000
Liabilities and Equity
Accounts payable
$10,000,000
Accruals
$9,000,000
Current liabilities
$19,000,000
Long-term debt (40,000 bonds, $1,000 par value)
$40,000,000
Total liabilities
$59,000,000
Common stock (10,000,000 shares)
$30,000,000
Retained earnings
$50,000,000
Total shareholders' equity
$80,000,000
Total liabilities and shareholders' equity
$139,000,000
The stock is currently selling for $15.25 per share, and its noncallable $1,000.00 par value, 20-year, 9.00% bonds with semiannual payments are selling for $930.41. The beta is 1.22, the yield on a 6-month Treasury bill is 3.50%, and the yield on a 20-year
Treasury bond is 5.50%. The required return on the stock market is 11.50%, but the market has had an average annual return of 14.50% during the past 5 years. The firm's tax rate is 25%. What is the best estimate of the firm's WACC? Do not round your
intermediate caleulations.
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