Cost of Capital (WACC) WACC = (E/V) × RE+ (D/V) × RD × (1 - Tc) (20 points) 2. You will be working as an analyst for Berkshire Hathaway. To prepare for their interview, you were told they use different ways to calculate the cost of capital of the companies they buy. One of them is the Weighted Cost of Capital or WACC. The BH team provided the following data and asked you to calculate the WACC of a target company they are evaluating for acquisition. (in millions) Value of Equity $275 Yield of Debt 7.53% Value of Debt $897 Tax rate 13.51% Return equity 15.21% a. What is the company's total value using the value of debt and equity? Provide the result as $000 (mn). b. What is the weighted average cost of capital? Provide the result as x.xx%.

WACC-Market value weights The market values and after-tax costs of various sources of capital used by Ridge Tool are shown in the following table: a. Calculate the firm's weighted average cost of capital. b. Explain how the firm can use this cost in the investment decision-making process. a. The firm's weighted average cost of capital, ra, using market value weights is %. (Round to two decimal places.) Data Table (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Source of capital Market value Individual cost $700,000 $30,000 $600,000 Long-term debt 6.2% Preferred stock 11.9% Common stock equity 16.5% Print Done

Webster Company has compiled the information shown in the following​ table attached: .   a. Calculate the weighted average cost of capital using book value weights.   b. Calculate the weighted average cost of capital using market value weights.   c. Compare the answers obtained in parts a and b. Explain the differences.

Use the information provided below to answer the following questions: 4.1 Calculate the weighted average cost of capital (calculations expressed to two decimal places, where applicable). (16 marks) 4.2 Calculate the cost of equity using the Gordon Growth Model (expressed to two decimal places). (4 marks) INFORMATION Capri Limited intends raising finance for a proposed new project. The financial manager has provided the following information to determine the present cost of capital to the company: The capital structure consists of the following: ■ 2 million ordinary shares issued at R2 each but currently trading at R3 each. The company’s beta coefficient is 1.4. The risk-free rate is 9%. The return on the market is 17%. ■ 1 million 12%, R2 preference shares with a market value of R3 per share. ■ R1 000 000 20% Bank loan, due in January 2026. Additional information ■ The Capital Asset Pricing Model is used to determine the cost of equity. ■ A dividend growth of 10% per annum on ordinary…

WACC-Book weights and market weights Webster Company has compiled the information shown in the following table: a. Calculate the weighted average cost of capital using book value weights. b. Calculate the weighted average cost of capital using market value weights. c. Compare the answers obtained in parts a and b. Explain the differences. a. The firm's weighted average cost of capital using book value weights is %. (Round to two decimal places.) i Data Table (Click on the icon located on the top-right corner of copy its contents into a spreadsheet.) data table bel order to Source of capital Book value Market value After-tax cost Long-term debt $4,000,000 $3,840,000 8% Preferred stock 40,000 65,000 13% Common stock equity 1,060,000 4,484,000 15% Totals $5,100,000 $8,389,000 Print Done

In question C there is a plot of of cost of debt, cost of equity and cost of capital. Can you show how r_a is calculated to be 0.18667? r_d = Cost of debt r_a = cost of capital r_e = Cost of equity

The market values and after-tax costs of various sources of capital used by Ridge Tool are shown in the following table. Source of capital Market value Individual cost Long-term debt $700,000 5.3% Preferred stock    50,000 12.0    Common stock equity   650,000 16.0    a. Calculate the firm’s WACC. b. Explain how the firm can use this cost in the investment decision-making process. Please show your work.

Account Question solve With Explanation and Also Provide Calculation

I NEED THE SOLUTION FOR PART C AND PART D

CALCULATING 3Ms COST OF CAPITAL In this chapter, we described how to estimate a companys WACC, which is the weighted average of its costs of debt, preferred stock, and common equity. Most of the data we need to do this can be found from various data sources on the Internet. Here we walk through the steps used to calculate Minnesota Mining Manufacturings (MMM) WACC. 3. Next, we need to calculate MMMs cost of debt. We can use different approaches to estimate it. One approach is to take the companys interest expense and divide it by total debt (which is the sum of short-term debt and long-term debt). This approach only works if the historical cost of debt equals the yield to maturity in todays market (i.e., if MMMs outstanding bonds are trading at close to par). This approach may produce misleading estimates in years in which MMM issues a significant amount of new debt. For example, if a company issues a great deal of debt at the end of the year, the full amount of debt will appear on the year-end balance sheet, yet we still may not see a sharp increase in annual interest expense because the debt was outstanding for only a small portion of the entire year. When this situation occurs, the estimated cost of debt will likely understate the true cost of debt. Another approach is to try to find this number in the notes to the companys annual report by accessing the companys home page and its Investor Relations section. Alternatively, you can go to other external sources, such as bondsonline.com, for corporate bond spreads, which can be used to find estimates of the cost of debt. Remember that you need the after-tax cost of debt to calculate a firms WACC, so you will need MMMs tax rate (which has averaged around 30% in recent years). What is your estimate of MMMs after-tax cost of debt?