Nelson's Landscaping has 1,200 bonds outstanding that are selling for $990 each. The company also has 2,500 shares of preferred stock (par = $25) at a market price of $28 a share. The common stock is priced at $37 a share and there are 28,000 shares outstanding. What is the weight of the common stock as it relates to the firm's weighted average cost of capital (WACC)? 43.08 percent 45.16 percent 47.11 percent 54.00 percent 55.45 percent

Nelson's Landscaping has 1,200 bonds outstanding that are selling for $990 each. The company also has 2,500 shares of preferred stock (par = $25) at a market price of $28 a share. The common stock is priced at $37 a share and there are 28,000 shares outstanding. What is the weight of the common stock as it relates to the firm's weighted average cost of capital (WACC)? 43.08 percent 45.16 percent 47.11 percent 54.00 percent 55.45 percent

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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FarCry Industries, a maker of telecommunications equipment, has 5 million shares of common stock outstanding, 2 million shares of preferred stock outstanding, and 20,000 bonds. Suppose the common shares are selling for $25 per share, the preferred shares are selling for $13.50 per share, and the bonds are selling for 97 percent of par.What would be the weight used for equity in the computation of FarCry’s WACC? (Round your answer to 2 decimal places.)
XRT Infrastructure Corp. has 80,000 bonds outstanding that are selling at 90% of the par value (Bonds are selling at discount). Bonds with similar characteristics are yielding 10.8%. The company also has 4 million shares of common stock outstanding. The stock has a beta of 1.1 and sells for $50 per share. The common shareholder anticipates receiving a dividend that will growth at 0%, based on the fact they received $5 dividend last year. The capital market analysts predict that dividends will continue to grow at the same rate into the foreseeable future. The firm’s tax rate is 28 percent. What would be your estimate of the cost of common stock (cost of equity)? What would be the estimate cost of capital (WACC)?
Bill's Boards has 6.3 million shares of common stock outstanding, 5.3 million shares of preferred stock outstanding, and 33.00 thousand bonds. If the common shares are selling for $29.40 per share, the preferred share are selling for $18.30 per share, and the bonds are selling for 95.87 percent of par, what would be the weight used for common stock in the computation of Bill's WACC? 33.33% 66.67% 54.16% 59.02%
FarCry Industries, a maker of telecommunications equipment, has 2 million shares of common stock outstanding, 1 million shares of preferred stock outstanding, and 10,0000 bonds. Suppose the common shares are selling for $27 per share, the preferred shares are selling for $14.50 per share, and the bonds are selling for 98 percent of par. What would be the weight used for equity in the computation of FarCry's WACC? (Round your answer to 2 decimal places. Write your answer in percentage.)
Jimmy Shoes Inc. has 10,000 shares outstanding with a stock price of $40 pershare. The current weighted average cost of capital is 7%. It also carrieslong-term debt of $200,000 at an interest rate of 7% p.a. One of the agendaitems in its AGM is to switch to a D/E of 1. Based on this information,answer the following questions:a) What will be the number of outstanding shares for Jimmy Shoes Inc. ifit switches to a D/E ratio of 1? (Hint: Current Debt = $200,000,current equity = 10,000 shares x $40 = $400,000, current D/E = 2/4 =0.5/1. If the firm seeks to increase its D/E to 1, it can think ofborrowing more)b) What is the level of EBIT at which shareholders will be indifferentbetween the two capital structures, the one with a D/E = 0.5/1 and theother with a D/E of 1?
Carrie D's has 5.9 million shares of common stock outstanding, 2.9 million shares of preferred stock outstanding, and 19.00 thousand bonds. If the common shares are selling for $29.00 per share, the preferred share are selling for $28.90 per share, and the bonds are selling for 108.91 percent of par, what would be the weight used for common stock in the computation of Carrie D's WACC? 66.90% 33.33% 66.67% 62.08%
Umbrella Corp.'s common stock currently is selling at $23 per share. There are 180,000\\noutstanding shares of common stock. Umbrella Corp also has 50,000 outstanding preferred\\nshares that are currently selling at $35 per share. Umbrella Corp also has issued 5,000 bonds\\nwhich are each currently selling at $968. The cost of capital for Umbrella Corp. is 13% for its\\ncommon stock, 10% for its preferred shares, and 8% for its bonds. Given it has a tax rate of 30%, \ \nwhat is Umbrella Corp.'s adjusted weighted-average cost of capital?
Men's Place has 21,000 shares of stock outstanding with a par value of $1 per share and a market value of $27.18 per share. The balance sheet shows $21,000 in the common stock account, $187,600 in the capital in excess of par value account, and $218,200 in the retained earnings account. The firm just announced a large stock dividend of 35 percent. What is the market value per share after the dividend?
Huntington Power Co. has issued following three securities as its long-term source of capital. Calculate the weights of each source of capital (kd, kp, ke). Debt: 2,500 bonds outstanding, current market price of the bond is $1,080. Preferred Stock: 3,000 shares outstanding, selling for $98. Common Stock: 60,000 shares outstanding, selling for $55 per share. a. 42.90%; 4.67%; 52.43% b. 45.63%; 1.72%; 59.67% c. 42.90%; 4.67%; 55.71% d. 59.67%; 5.08%; 35.24% e. 45.63%; 1.72%; 52.65% f. 42.90%; 2.23%; 52.14%
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%
Cleveland Corporation has 100,000 shares of common stock outstanding. The company's net income is $1,400,000 and its P/E is 16. What is the company's stock price? Round it to a whole dollar.

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