Company Total assets Interest-bearing debt Average pre-tax borrowing cost Common equity: Book value Market value Income tax rate Market equity beta Risk free rate Market risk premium A 14000 2500 6.00% 3000 2500 35.00% 2.25 2.50% 4.50% B 110000 33000 4.00% 13000 110000 35.00% 0.75 2.50% 4.50% C 44000 18000 5.00% 14000 22000 35.00% 1.2 2.50% 4.50% [WD x RD * (1 − tax rate)] + [wP x RP] + [wE * RE] = - 1 Compute the weighted average cost of capital (WACC) for Company A assuming a cost of equity capital of 12.63%. COST OF EQUITY 12.625 2 Compute the weighted average cost of capital (WACC) for Company B assuming a cost of equity capital of 5.88%. COST OF EQUITY 5.875 3 Compute the weighted average cost of capital (WACC) for Company C assuming a cost of equity capital of 7.90%. COST OF EQUITY 7.9

Company Total assets Interest-bearing debt Average pre-tax borrowing cost Common equity: Book value Market value Income tax rate Market equity beta Risk free rate Market risk premium A 14000 2500 6.00% 3000 2500 35.00% 2.25 2.50% 4.50% B 110000 33000 4.00% 13000 110000 35.00% 0.75 2.50% 4.50% C 44000 18000 5.00% 14000 22000 35.00% 1.2 2.50% 4.50% [WD x RD * (1 − tax rate)] + [wP x RP] + [wE * RE] = - 1 Compute the weighted average cost of capital (WACC) for Company A assuming a cost of equity capital of 12.63%. COST OF EQUITY 12.625 2 Compute the weighted average cost of capital (WACC) for Company B assuming a cost of equity capital of 5.88%. COST OF EQUITY 5.875 3 Compute the weighted average cost of capital (WACC) for Company C assuming a cost of equity capital of 7.90%. COST OF EQUITY 7.9

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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What is the weighted-average cost of capital for SKYE Corporation given the following information? Equity shares outstanding Stock price per share Yield to maturity on debt Book value of interest-bearing debt Coupon interest rate on debt. Interest rate on government bonds SKYE's equity beta Historical excess return on stocks Tax rate Note: Enter your answer to 1 decimal place. Weighted-average cost of capital % 1 million. $ 35 7.68% $14 million 9% 7% 0.75 7.0% 40%
vas.msst Net sales Operating costs except depreciation Depreciation Earnings before interest and taxes (EBIT) Less interest Earnings before taxes (EBT) Taxes Net income Other data: Shares outstanding (millions) Common dividends (millions of $) Int rate on notes payable & L-T bonds Federal plus state income tax rate Year-end stock price $98,000 91.140 1,960 $4,900 960 $3,940 1,576 $2,364 500.00 $827.40 6% 40% $56.74 Refer to Exhibit 4.1. What is the firm's ROA? Do not round your intermediate calculations,
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View Policies Current Attempt in Progress Using the following balance sheet and income statement data, what is the debt to assets ratio? Current assets $31500 Net income $41100 Stockholders' Current liabilities 15400 79400 equity Average assets 162500 Total liabilities 42300 Total assets 114000 Average common shares outstanding was 15500. 37 percent O 70 percent O 15 percent O 28 percent Attempts: 0 of 1 used Save for Later
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