Coffee carts has a cost of equity of 15%, has an effective cost of debt of 4%, and if financed 70% with an equity of 30% with debt. Required: What is this firm's WACC?
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What is the firm's WACC on these accounting question?
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- FinanceYou have the following information about Burgundy Basins, a sink manufacturer. Equity shares outstanding Stock price per share Yield to maturity on debt Book value of interest-bearing debt Coupon interest rate on debt Market value of debt Book value of equity Cost of equity capital Tax rate a. What is the internal rate of return on the investment? Note: Round your answer to 2 decimal places. Internal rate of return 20 million Burgundy is contemplating what for the company is an average-risk investment costing $30 million and promising an annual ATCF of $4.5 million in perpetuity. % $ 35 7.5% $ 330 million 4.0% $225 million $370 million 11.0% 35%You are analyzing the cost of capital for a firm that is financed with 65 percent equity and 35 percent debt.The cost of debt capital is 8 percent, while the cost of equity capital is 20 percent for the firm. What is the overall cost of capital for the firm? Select one: a. None of these b. 12.2% с. 15.8% d. 20.2%
- If a firm now has a debt ratio of 50% but plans to finance with only 40% debt in thefuture, what should it use as wd when it calculates its WACC? Explain.A firm needs to raise $650 million for a project; external equity financing will be required. The firm faces flotation costs of 8.0% for equity and 2.0% for debt. If the debt to equity ratio is 0.75, the average flotation cost incurred by the firm will be ________ %Assume there are two firms with a MV of $50,000,000. Firm A consists of 10% debt and 90% equity. Firm B consists of 40% debt and 60% equity. Assume perfect capital markets and M&M Proposition 2 holds. Which firm will have a higher expected return for equity holders? Why? For the toolhar prace ALT+F10/PC or ALT+FN+F10 (Mac).
- For examples 1 and 2, assume the net cash flow is 2,000,000, the tax rate is 40% and the cost of common equity is 10% which is computed using the CAPM equation. Explain in a few sentences what each example means.You are analyzing the cost of capital for a firm that is financed with 65 percent equity and 35 percent debt.The cost of debt capital is 8 percent, while the cost of equity capital is 20 percent for the firm. What is the overall cost of capital for the firm? Select one: a. 20.2 % b. 15.8 % c. 12.2 % d. None of theseYou are analyzing the cost of capital for a firm that is financed with 65 percent equity and 35 percent debt.The cost of debt capital is 8 percent , while the cost of equity capital is 20 percent for the firm . What is the Coverall cost of capital for the firm ? Select one a . None of these b . 12.2 % C. 15.8 % d . 20.2 %
- A firm has an asset turnover ratio of 5.0. Its plowback ratio is 50%, and it is all-equity-financed. If the profit margin of the firm is 3%, what is the maximum payout ratio that will allow it to grow at 5% without resorting to external financing? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Maximum payout ratio %1) A firm that is currently unlevered has WACC = rS = 10%/year. This company plans to do a recapitalization by issuing debt and repurchasing equity. After the recapitalization, the debt-to-equity (D/E) ratio will be 0.5. If the cost of debt, rD, is 6%, what will be rS after the recapitalization? 2) A firm with wD = 0.35 and wS = 0.65 plans to issue another $100 million of permanent debt. The firm's tax rate is 21%. The bonds will be issued at par with coupon rate = rD = 7%/year. The firm's WACC is 11%/year. By how much will the new debt change the value of the firm, and who will receive this value? A) Firm value will increase by $21 million, and all $21 million will go to the shareholders B) Firm value will increase by $9 million, and 35% will go to the bondholders, 65% to the shareholders C) Firm value will increase by $18.6 million, and 35% will go to the bondholders, 65% to the stockholders D) Firm value will increase by $21 million, and all $21 million will go to the…What is a firm's weighted average cost of capital for a firm that is financed 45% by debt? The debt has a 10% required return and the equity has a 17% required return. Thetax rate is 30%