Erna Corp. has 8 million shares of common stock outstanding. The current share priceis $73, and the book value per share is $7. Erna Corp. also has two bond issuesoutstanding. The first bond issue has a face value of $85 million, has a 7 percentcoupon, and currently trades for $93.5 million. The second issue has a face value of$50 million, has an 8 percent coupon, and currently trades for $64 million. The firstissue matures in 21 years, the second in 6 years. The company corporate tax rate is0%. What is Erna's weight on equity in the WACC formula?0.8120.2140.7880.764

Current value of 1st bond = $93,500,000Current value of 2nd bond = $64,000,000Face value of 1st bond…

Erna Corp. has 8 million shares of com is $73, and the book value per share is outstanding. The first bond issue has a coupon, and currently trades for $93.5 $50 million, has an 8 percent coupon, issue matures in 21 years, the second 0%. What is Erna's weight on equity in 0.812 0.214 0.788 O 0.764

Erna Corp. has 8 million shares of com is $73, and the book value per share is outstanding. The first bond issue has a coupon, and currently trades for $93.5 $50 million, has an 8 percent coupon, issue matures in 21 years, the second 0%. What is Erna's weight on equity in 0.812 0.214 0.788 O 0.764

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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Firm Z has issued 1,000,000 bonds. Each bond is priced at $929 and has a face value of $1000. It pays annual coupon payments and has a coupon rate of 3%. The bonds will mature in 20 years. Stock price of Firm Z is $10, and there are 50 million shares outstanding. There are 2 million shares of preferred stock, which offers $2 dividend and is priced at $40. Equity beta of Firm Z is 1.5 and current market portffolio yields 8% and the risk free rate is 2%. Corproate tax rate is 30%. Find the costs of debt, equity, preferred stock and WACC. Please show your work.
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Currently, the number of outstanding shares issued by Ponggol Limited (“Ponggol”) is 25,000,000 and it trades at $2.50 per share. Ponggol operates several high-tech indoor vegetable farms in Singapore. Three years ago, Ponggol issued 80,000 bonds (which currently trades at $1,080) based on the following terms:• Coupon = 6% (paid semi-annually)• Maturity = 10 years• Par value = $1,000 The debt/equity ratio of the high-tech agriculture industry is 0.5. By applying Modigliani and Miller theory, hypothesize what Ponggol should do to maximize the value of the firm. State your assumptions. No computations are required.
The JIRAF Company has 1700 bonds outstanding that have a market price of $1200 each and a face value of $1000. floatation cost is 0.015 the bond pays coupon of 0.055 quarterly for 11 years. The company also has 6,00 shares of preferred stock at a market price of $40 and dividends 1.5 each par value 20 dollars. The common stock is priced at $29 a share it is undervalued by $1.5 and there are 70000 shares outstanding, par value is 5 dollars the stock paid this year $1.1 and will continue to grow at a rate of 0.035 TAXES ARE 0.25 what is the cost of debt after tax? what is the cost of PS what is the cost of common stock? what is the weight of the bond according to book value method what is the weight of the stock according to book value method what is the weight of preferred stock according to book value method what is the weight of preferred stock according to book value method
A 16. Subject:- finance
Consider the following book value balance sheet of ABC, in which all figures are in million dollars. The preferred stock currently sells for $15 per share and the common stock for $20 per share. There are 1 million common shares outstanding. Assets Liabilities and Net Worth Cash and short-term securities $1 Bonds with coupon rate of 8% paid annualy, maturity of 10 years and the current yield to maturity of 9% $10 Account receivables $3 Preferred stock (par value $10 per share) $2 Inventories $7 Common stock $10 Plant and equipment $21 Retained earnings $10 Total $32 $32 a) What is the capital structure of the firm based on market values? b) The preferred stock pays a dividend of $2 per share, the beta of the common stock is 1.5, the market risk premium is 7%, the risk-free rate is 4%, and the firm’s tax rate is 40%. ABC’s bonds have coupon rate of 6%, and currently are trading at par. What is the firm’s weighted average cost of capital (WACC)?…
Ahmed Company has 8.5 million shares of common stock outstanding, 250,000 shares of 5 percentpreferred stock outstanding, and 135,000 7.5 percent semiannual bonds outstanding, par value $5,000each. The common stock currently sells for $34 per share (Par value= $10) and has a beta of 1.25, thepreferred stock currently sells for $91 per share, and the bonds have 15 years to maturity and sell for114 percent of par. The market risk premium is 7.5 percent, T-bills are yielding 4 percent, and AhmedCompany tax rate is 36 percent.a. What is the firm’s market value capital structure?b. If Ahmed Company is evaluating a new investment project that has the same risk as the firm’s typicalproject, what rate should the firm use to discount the project’s cash flows? If we use debt 35%, preferredstock 15% and common stock 50%, what will be the discount rate by assuming same cost of eachfinancing?
Dani Corporation has 5 million shares of common stock outstanding. The current share price is $65, and the book value per share is $4. The company also has two bond issues outstanding. The first bond issue has a face value of $50 million, has a coupon rate of 5 percent, and sells for 90 percent of par. The second issue has a face value of $35 million, has a coupon rate of 4 percent, and sells for 102 percent of par. The first issue matures in 20 years, the second in 5 years. Both bonds make semiannual coupon payments. a. What are the company's capital structure weights on a book value basis? Note: Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616. b. What are the company's capital structure weights on a market value basis? Note: Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616. c. Which are more relevant, the book or market value weights? a. Equity/Value Debt/Value b. Equity/Value Debt/Value c.…
Can not figure out of second part of the question
Dani Corporation has 7 million shares of common stock outstanding. The current share price is $79, and the book value per share is $10. The company also has two bond Issues outstanding. The first bond issue has a face value of $120 million, a coupon rate of 4 percent, and sells for 92 percent of par. The second issue has a face value of $105 million, a coupon rate of 3 percent, and sells for 104 percent of par. The first issue matures In 22 years, the second in 7 years. Suppose the most recent dividend was $4.75 and the dividend growth rate is 5.2 percent. Assume that the overall cost of debt is the weighted average of that implied by the two outstanding debt issues. The tax rate Iis 25 percent. What is the company's WACC? (Do not round Intermedlate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) WACC %

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