REQUIREMENT:1. How much is the weighted average cost of capital of ABC? ABC Corporation has the following capital structure and costs. Further assume that ABC's incomeis taxed at 25%.AmountPre-tax CostP 3,000,0001,000,0004,000,000Bonds8%Preferred Shares10%Ordinary Shares15%

Weighted average cost of capital is cost of capital considering the weights of different sources of…

Answered: axed at 25%. Amount Pre-tax Cost Bonds…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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S&G Given the following information on S & G Inc.'s capital structure, compute the company's weighted average cost of capital. Type of Capital Percent of Capital Structure Before-Tax Component Cost Bonds 40% 7.5% Preferred Stock 5% 11% Common Stock (Internal Only) 55% 15% The tax rate is 28%. 15) The after tax rate for the bond is %. (2 decimals) %. (2 16) Before tax wacc is decimals) 17) After tax wacc is _-- _%. (2 decimals)
Calculate the WACC for the Zodiac Company given the following information about its capital structure. Capital Component Value Cost Debt $ 60,000 9% (after tax) Preferred stock $50,000 11% Common stock $90,000 14% Total Capital $200,000
You have been presented with the following information from Bogus Ltd. Source of Capital Book Value Market Value Before-tax cost Long-term debt R11 823 158 R7 389 474 8% Preference shares R118 232 R177 347 13% Ordinary shares R3 103 579 R8 867 368 17% Total R15 044 969 R16 434 189 Assume Bogus Ltd has an average tax rate of 27% Required: a) Calculate the WACC based on the book value weights. Round off answers to two decimal places b) Compare the book value and market value method of calculating the WACC.
The company's capital structure is as follows Debt Weight 25%. Preferred Stock Weight 25% Common equity Weight 50%. The cost of debt is 12%6, the cost of preferred stock is 15% and the cost of common equity is 0.244 Calculate the companys weighted average Cost of tapital. Select one: Oa ob920 Ob.0.1895 Oc01520 Od All the given choices are not correct Oe 0.1595
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The company capital structure consists of debt 250000 at 0.076, preferred stock 230000 at 11% and common stock 120000 at 14%, calculate company's weighted average cost of capital Select one: O a. 0.0737 O b. All the given choices are not correct O c. 0.0316 O d. 0.0596 O e. 0.1017
Consider a company with the following capital structure and subject to a company tax rate of 30%: Market Value Market Yield (before-tax) Ordinary shares $2,000,000 16% Preference shares $1,000,000 15% Bonds $2,000,000 12% Calculate the after-tax weighted average cost of capital for the company Explain why the market yields for ordinary shares and preference shares do not need to be adjusted for taxation
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axed at 25%. Amount Pre-tax Cost Bonds P 3,000,000 1,000,000 4,000,000 8% Preferred Shares 10% Drdinary Shares 15%