Examine the following book-value balance sheet for University Products Incorporated. The preferred stock currentlysells for $15 per share and pays a dividend of $3 a share. The common stock sells for $16 per share and has a beta of0.9. There are 2 million common shares outstanding. The market risk premium is 9%, the risk-free rate is 5%, and thefirm's tax rate is 21%.AssetsCash and short-term securitiesAccounts receivableInventoriesPlant and equipment.Total$2.03.07.021.0$ 33.0a. Market debt-to-value ratiob. WACCBOOK VALUE BALANCE SHEET(Figures in $ millions)Liabilities and Net WorthBonds, coupon = 6%, paid annually (maturity = 10 years, current.yield to maturity = 8%)Preferred stock (par value $15 per share)Common stock (par value $0.20)Additional paid-in stockholders' equityRetained earningsTotala. What is the market debt-to-value ratio of the firm?b. What is University's WACC?Note: For all the requirements, do not round intermediate calculations. Enter your answers as a percent roundedto 2 decimal places.$10.03.00.413.66.0$ 33.0%%

A company's average after-tax cost of capital from all sources, including common stock, preferred…

Examine the following book-value balance sheet for University Products Incorporated. The preferred stock currently sells for $15 per share and pays a dividend of $3 a share. The common stock sells for $16 per share and has a beta of 0.9. There are 2 million common shares outstanding. The market risk premium is 9%, the risk-free rate is 5%, and the firm's tax rate is 21%. Assets Cash and short-term securities Accounts receivable Inventories Plant and equipment Total $ 2.0 3.0 7.0 21.0 $ 33.0 BOOK VALUE BALANCE SHEET (Figures in $ millions) Liabilities and Net Worth Bonds, coupon 6%, paid annually (maturity = 10 years, current yield to maturity 8%) Preferred stock (par value $15 per share) Common stock (par value $0. 20) Additional paid-in stockholders' equity Retained earnings Total a. What is the market debt-to-value ratio of the firm? b. What is University's WACC? $ 10.0 3.0 0.4 13.6 6.0 $ 33.0

Examine the following book-value balance sheet for University Products Incorporated. The preferred stock currently sells for $15 per share and pays a dividend of $3 a share. The common stock sells for $16 per share and has a beta of 0.9. There are 2 million common shares outstanding. The market risk premium is 9%, the risk-free rate is 5%, and the firm's tax rate is 21%. Assets Cash and short-term securities Accounts receivable Inventories Plant and equipment Total $ 2.0 3.0 7.0 21.0 $ 33.0 BOOK VALUE BALANCE SHEET (Figures in $ millions) Liabilities and Net Worth Bonds, coupon 6%, paid annually (maturity = 10 years, current yield to maturity 8%) Preferred stock (par value $15 per share) Common stock (par value $0. 20) Additional paid-in stockholders' equity Retained earnings Total a. What is the market debt-to-value ratio of the firm? b. What is University's WACC? $ 10.0 3.0 0.4 13.6 6.0 $ 33.0

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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The total book value of WTC's equity is $13 million, and book value per share is $20. The stock has a market-to-book ratio of 1.5, and the cost of equity is 9%. The firms bonds have a face value of $9 million and sell at a price of 110% of face value. The yield to maturity on the bonds is 7% andthe firm's tax rate is 21%. What is the company's WACC? (Don't round intermediate calculations, enter final answers as a percent rounded to 2 decimal places.)
Granite Works maintains a debt-equity ratio of .65 and has a tax rate of 32%. The pretax cost of debt is 9.8%. There are 25,000 shares of stock outstanding with a beta of 1.2 and a market price of $19 a share. The current market risk premium is 8.5% and the current risk-free rate is 3.6%. This year, the firm paid an annual dividend of $1.10 a share and expects to increase that amount by 2% each year. Using an average expected cost of equity, what is the WACC?
You are considering investing in ABC, Inc. The current price of ABC, Inc. is $62 a share, the after-tax earnings are $37,900,000, and there are 13,000,000 outstanding shares of common stock. What is ABC, Inc.'s price/earnings ratio? 15.5 21.3 47 17.6 4.8
The total book value of WTC's equity is $13 million, and book value per share is $26. The stock has a market-to-book ratio of 1.5, and the cost of equity is 15%. The firm's bonds have a face value of $9 million and sell at a price of 110% of face value. The yield to maturity on the bonds is 10%, and the firm's tax rate is 21%. What is the company's WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
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)?…
Subject:- finance
McCann Catching, Inc. has 3.00 million shares of stock outstanding. The stock currently sells for $12.79 per share. The firm's debt is publicly traded and was recently quoted at 89.00% of face value. It has a total face value of $19.00 million, and it is currently priced to yield 10.00%. The risk free rate is 3.00% and the market risk premium is 8.00%. You've estimated that the firm has a beta of 1.20. The corporate tax rate is 34.00%. The firm is considering a $45.89 million expansion of their production facility. The project has the same risk as the firm overall and will earn $11.00 million per year for 7.00 years. What is the NPV of the expansion? (answer in terms of millions, so 1,000,000 would be 1.0000)
Suppose Beta Industries and Delta Technology have identical assets that generate identical cash flows. Beta Industries is an all-equity firm, with 7 million shares outstanding that trade for a price of $16.00 per share. Delta Technology has 22 million shares outstanding, as well as debt of $33.60 million. a. According to MM Proposition I, what is the stock price for Delta Technology? b. Suppose Delta Technology stock currently trades for $8.27 per share. What arbitrage opportunity is available? What assumptions are necessary to exploit this opportunity? a. According to MM Proposition I, what is the stock price for Delta Technology? According to MM Proposition I, the stock price per share for Delta Technology is $ (Round to the nearest cent.)
Estimating Components of both WACC and DDMAn analyst estimates the cost of debt capital for Abbott Laboratories is 3.0% and that its cost of equity capital is 5.0%. Assume that ABT’s statutory tax rate is 21%, the risk-free rate is 2.1%, the market risk premium is 5%, the ABT market price is $84.10 per common share, and its dividends are $1.28 per common share.(a) Compute ABT’s average pretax borrowing rate and its market beta. (Round your answers to one decimal place.) Average borrowing rate = Market beta = (b) Assume that its dividends continue at the current level in perpetuity. Use the constant perpetuity dividend discount model to infer the market's expected cost of equity capital. (Hint: Use Price per share = Dividends per share/Cost of equity capital.) (Round your answer to one decimal place.)
Mitsu Corporation has 100,000 shares of common stock outstanding. The stock currently sells for $50 per share and has a beta of 1.8. The firm has $4 million debt outstanding. The cost of debt before tax is 6.5%. The market risk premium is 7%. T- bills are yielding 4%. Tax rate is 35%. What is the weighted average cost of capital (WACC) of the firm? A) 9.07% O B) 11.10% C) 9.93% D) 11.50% E) 10.36%

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