Coroporate finance1. SGS Company needs to introduce a new product to the market and need acapital of $100,000. SGS can acquire its capital from different sources. ItBorrows $55,000 from the bank with an Interest rate of 12% and taxes are 40%;Issue preferred stocks for $15,000 with a floatation cost for 8% and eachpreferred stock price is 110$ and pays a dividend of 10$ and use the remainingneeded capital from retained earnings, knowing that the common stock of XYZ iscurrently trading for 135$. and its earnings growth rate is 5%. If the WACC of SoSis 8.052% then how much is the difference between the dividend paid onpreferred stock and the expected dividend paid of common stock (Round to thenearest number) *$10O S7$5$3None of the above

Weighted average cost of capital is the cost of capital using weights of different methods of…

market and need a apital of $100,000. SGS can acquire its capital from different sources. It Forrows $55,000 from the bank with an Interest rate of 12% and taxes are 40%; Ssue preferred stocks for $15,000 with a floatation cost for 8% and each referred stock price is 110$ and pays a dividend of 10$ and use the remaining eeded capital from retained earnings, knowing that the common stock of XYZ is urrently trading for 135$. and its earnings growth rate is 5%. If the WACC of SoS

market and need a apital of $100,000. SGS can acquire its capital from different sources. It Forrows $55,000 from the bank with an Interest rate of 12% and taxes are 40%; Ssue preferred stocks for $15,000 with a floatation cost for 8% and each referred stock price is 110$ and pays a dividend of 10$ and use the remaining eeded capital from retained earnings, knowing that the common stock of XYZ is urrently trading for 135$. and its earnings growth rate is 5%. If the WACC of SoS

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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Jiffy Wax Corp. can sell common stock for $ 15 per share and its investors require a 14% return. However, the administrative or flotation costs associated with selling the stock amount to $ 2.40 per share. What is the cost of capital for Jiffy Wax if the corporation raises money by selling common stock? Select one: a. 14.00% b. 21.50% C 30.00% d. 16.67%
Lancaster Engineering Inc (LEI) has the following capital structure, which it considers to be optimal. Long Term Debt 30% Preferred Stock 10% Common Stock 60% Total 100% LEI can obtain capital in the following ways: New Preferred Stock with a dividend of $12 can be sold at $97 to the public; however LEI will incur $2 of flotation costs for each share it sells. Debt can be sold at a pre-tax cost of 12%. LEIâs tax rate is 40%. (Note that 12% is the pre-tax cost; all costs must be expressed on an after-tax basis so as to be comparable.) LEI can sell its common stock for $55. However they expect underwriting fees to be $3 per share and an additional $2 per share in other flotation costs. They expect to pay a dividend on the common stock next year of $3.50 and it is expected that dividends will continue to grow at the historical rate of 8%. Required: Determine the cost of each capital component. Determine the weighted average cost of capital (WACC) for LEI.
The asset of a firm is financed by $100,000 Common Equity, $100,000 Preferred Stock, and $300,000 Bonds. The Weighted Average Cost of Capital (WACC) is 10%. Given that the asset is likely to generate Net Operating Profit After Tax of $100,000. What would be the firm’s EVA? Question 5 options: 1) $5,000 2) $50,000 3) $20,000 4) None of the above.
Divided Walls Construction (DWC) has determined that the yield to maturity (YTM) on new bonds is 5 percent, its cost of retained earnings is 8 percent, and its cost of new common stock is 11 percent. If DWC’s capital structure consists of 40% debt and 60$ common equity, what is its weighted average cost of capital (WACC) if it (a) does not have to issue new stock to raise additional funds and (b) must issue new stock to raise additional funds? DWC’s marginal tax rate is 35 percent.
RAFA Corp. is considering to issue new shares with a par value of P1,000, issue price of P1,200 and net proceeds of 1,050. Shareholders expect dividends of P80 per share for the first year and a growth rate of 4%. It may also use retained earnings as an alternative source of financing? Choosing the better alternative of the two, what would the incremental cost of capital be for RAFA? * 11.619 10.667 12.000 7.924
Give typing answer with explanation and conclusion INTC Inc. has 5 million outstanding shares of common stock which has a beta of 1.05. The current market price is $25 per share and the book value per share is $17. It has a bond issue outstanding with a face $50 million which currently trades at a discount and sell at 90% of face. If you were asked to calculate the weighted cost of capital what capital structure weights would you use?
Zang Industries has hired the investment banking firm of Eric, Schwartz, & Mann (ESM) to help it go public. Zang and ESM agree that Zang’s current value of equity is $60 million. Zang currently has 4 million shares outstanding and will issue 1 million new shares. ESM charges a 7% spread. What is the correctly valued offer price, rounded to the nearest penny? How much cash will Zang raise net of the spread (use the rounded offer price)?
Foundation Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, the company would have 200,000 shares of stock outstanding. Under Plan II, there would be 115,000 shares of stock outstanding and $1.75 million in debt outstanding. The interest rate on the debt is 8 percent and there are no taxes. a. Use MM Proposition I to find the price per share. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the value of the firm under each of the two proposed plans? (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) a. Share price b. All-equity plan b. Levered plan
Global Pistons (GP) has common stock with a market value of $450 million and debt with a value of $321 million. Investors expect a 15% return on the stock and a 5% return on the debt. Assume perfect capital markets. a. Suppose GP issues $321 million of new stock to buy back the debt. What is the expected return of the stock after this transaction? b. Suppose instead GP issues $48.94 million of new debt to repurchase stock. i. If the risk of the debt does not change, what is the expected return of the stock after this transaction? ii. If the risk of the debt increases, would the expected return of the stock be higher or lower than when debt is issued to repurchase stock in part (i)? a. Suppose GP issues $321 million of new stock to buy back the debt. What is the expected return of the stock after this transaction? If GP issues $321 million of new stock to buy back the debt, the expected return is _______________ (Round to two decimal places.)
please answer the question as in attached file asap. thanks
YNWA Limited has asked you to calculate the return on its ordinary shares to help in its calculation of its weighted average cost of capital (WACC). YNWA has 2,000,000 ordinary shares on issue that have a beta of 1.79. The last dividend was $6.66. If the risk-free rate is 1.73% and the return on the market is 5.63%. What is the required return on one of YNWA's ordinary shares? Record your answer to the nearest four decimal places (e.g., if your answer is 3.40%, then report 0.0340).
Thank you so much!

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