Finding the WACC [LO3] Given the following information for EvenflowPower Co., find the WACC. Assume the company's tax rate is 35 percent.Debt:8,000 6.5 percent coupon bonds outstanding, $1,000 parvalue, 20 years to maturity, selling for 92 percent of par; thebonds make semiannual payments.YTM=7.26%Common stock: 250,000 shares outstanding, selling for $57 per share; the betais 1.05.Preferred stock: 15,000 shares of 5 percent preferred stock outstanding,currently selling for $93 per share.8 percent market risk premium and 4.5 percent risk-free rate.Market:

The WACC weighted average cost of capital is the weighted cost of debt , weighted cost of equity and…

'inding the W Given the following information for Eve Power Co., find the WACC. Assume the company's tax rate is 35 perc Debt: YTM=7.26% Common stock: Preferred stock: 8,000 6.5 percent coupon bonds outstanding, $1 value, 20 years to maturity, selling for 92 percer bonds make semiannual payments. 250,000 shares outstanding, selling for $57 per is 1.05. 15,000 shares of 5 percent preferred stock outsta currently selling for $93 per share.

'inding the W Given the following information for Eve Power Co., find the WACC. Assume the company's tax rate is 35 perc Debt: YTM=7.26% Common stock: Preferred stock: 8,000 6.5 percent coupon bonds outstanding, $1 value, 20 years to maturity, selling for 92 percer bonds make semiannual payments. 250,000 shares outstanding, selling for $57 per is 1.05. 15,000 shares of 5 percent preferred stock outsta currently selling for $93 per share.

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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You are given the following information regarding UFSK limited, a listed entity. Number of outstanding shares 100 000 Earnings 300 000 Retention ratio 60% 91-day Treasury bill rate 6% Market risk premium 8% UFSK Beta 1.2 Dividend growth rate stable phase 5% Bonds outstanding 5 000 Par value per bond 1000 Semi-annual coupon rate on bonds 6% Bond yield to maturity 8% Bond years remaining to maturity 4 Corporate tax rate 30% Additional information UFSK limited recently paid a dividend UFSK recently signed a deal and expects a super normal growth in earnings. The company expects earnings to grow by 8% for the first two years then decline by 2% in the following year, there after a stable growth of 5% is expected into the future. Required: As an investment analyst advise your client how much must she expect to pay for UFSK limited stock. Ascertain the market value of UFSK…
Jerry Jeff, Inc. has 14,900 shares of common stock outstanding at a price per share of $77 and the rate of return on the stock is 11.69 percent. The value of Jerry Jeff's debt is $586,800 and the required rate of return on the debt is 6.17 percent. What is the Jerry Jeff's WACC if the tax rate is 21 percent? Multiple Choice 9.82% 8.53% 8.70% 9.38%
Report inc as a shipping company with securities listed on the American stock exchange. The company has the following capital structure : Equity Common shares ($1 per share nominal value) Reserves $m $m 40 85. 125 Debt 5.5% unsecured bond ($100 per bond nominal value 55 20 year secured bank loan. 25 5%preference shares ($1 per share nominal value). 30 Total equity and debt 110 235 The common share have a beta of…
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)?…
n Tina Black's Fabrics is currently an all equity firm that has 15,000 shares of stock outstanding at a market price of $12.50 a share. Company management has decided to issue $60,000 worth of debt and use the funds to repurchase shares of the outstanding stock at the market price. The interest rate on the debt will be 7%. Ignoring taxes, what is the earnings per share (EPS) at the break-even level of earnings before interest and taxes (EBIT)? O A. O B. O D. $1.143 O C. $1.500 SOE. $1.125 $0.875 $0.667 27/
19) Ye are given the following information regarding UFSK limited, a listed entity. UO yM Numuer of outstanding shares 100 000 Earnings 300 000 Retention ratio 60% 91-day Treasury bill ate 6% Market risk premium 8% UFSK Beta 1.2 Dividend growth rate stable phase 5% Bonds outstanding 5 000 L Par value per bond 1000 Semi-annual coupon rate on bonds 6% Bond yield to maturity 8% Bond years remaining to maturity Corporate tax rate 30% Additional information UFSK limited recently paid a dividend • UFSK recently signed a deal and expects a super normal growth in earnings. The company expects earnings to grow by 8% for the first two years then decline by 2% in the following year, there after a stable growth of 5% is expected into the future. Required: a) As an investment analyst advise your client how much must she expect to pay for UFSK limited stock. b) Ascertain the market value of UFSK limited equity. c) Determine the fair value of UFSK limited bond d) Determine the total value of the…
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Debt: $69,000,000 book value outstanding. The debt is trading at 95% of book value. The yield to maturity is 10%. Equity: 1,900,000 shares selling at $36 per share. Assume the expected rate of return on Federated's stock is 19%. • Taxes: Federated's marginal tax rate is T_{c} = 0.21 . Suppose Federated Junkyards decides to move to a more conservative debt policy. A year later, its debt ratio is down to 16.50% (D/V= 0.1650). The pre-tax cost of debt has dropped to 9.6%. The company's business risk, opportunity cost of capital, and tax rate have not changed. Use the three-step procedure to calculate Federated's WACC under these new assumptions.

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