Phillips Equipment has 6,500 bonds outstanding that are selling at 96.5 percent of par. Bonds with similarcharacteristics are yielding 6.7 percent, pretax. The company also has 48,000 shares of 5.5 percent preferred stock and75,000 shares of common stock outstanding. The preferred stock sells for $64 per share. The common stock has a betaof 1.32 and sells for $41 per share. The preferred stock has a stated value of $100. The U.S. Treasury bill is yielding 2.2percent and the return on the market is 10.6 percent. The corporate tax rate is 21 percent. What is the weightedaverage cost of capital?O 8.09%O 8.64%O 10.18%O 10.56%AMoving to another question will save this response.«< Question 29 of 30

Weighted average cost of capital (WACC) When a firm has different sources of financing, the cost of…

Answered: Phillips Equipment has 6,500 bonds…

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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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%
Bill's Boards has 6.5 million shares of common stock outstanding, 5.5 million shares of preferred stock outstanding, and 35.00 thousand bonds. If the common shares are selling for $29.60 per share, the preferred share are selling for $18.50 per share, and the bonds are selling for 95.85 percent of par, what would be the weight used for equity in the computation of Bill's WACC?
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
Filer Manufacturing has 6,294,304 shares of common stock outstanding. The current share price is $44.58, and the book value per share is $7.96. Filer Manufacturing also has two bond issues outstanding. The first bond issue has a face value of $68,793,629, has a 0.06 coupon, matures in 7 years and sells for 84 percent of par. The second issue has a face value of $42,689,410, has a 0.06 coupon, matures in 12 years, and sells for 83 percent of par. What is Filer's weight of equity on a market value basis? Enter the answer with 4 decimals (e.g. 0.2345) 0.7056 0.7506 margin of error +/- 1%
Filer Manufacturing has 4,308,744 shares of common stock outstanding. The current share price is $42.19, and the book value per share is $9.71. Filer Manufacturing also has two bond issues outstanding. The first bond issue has a face value of $46,309,431, has a 0.08 coupon, matures in 8 years and sells for 82 percent of par. The second issue has a face value of $41,779,016, has a 0.06 coupon, matures in 20 years, and sells for 80 percent of par. What is Filer's weight of debt on a market value basis? Enter the answer with 4 decimals (e.g. 0.2345)
Tom and Jerry's has 3.4 million shares of common stock outstanding, 3.4 million shares of preferred stock outstanding, and 24.00 thousand bonds. If the common shares are selling for $14.40 per share, the preferred share are selling for $11.40 per share, and the bonds are selling for 99.86 percent of par, what would be the weight used for equity in the computation of Tom and Jerry's WACC?
Phillips Equipment has 80,000 bonds outstanding that are selling at par. Bonds with similar characteristics are yielding 6.75 percent. The company also has 750,000 shares of 7 percent preferred stock and 2.5 million shares of common stock outstanding. The preferred stock sells for $53 a share. The common stock has a beta of 1.34 and sells for $42 a share. The U.S. Treasury bill is yielding 2.8 percent and the return on the market is 11.2 percent. The corporate tax rate is 38 percent. What is the firm's weighted average cost of capital
Filer Manufacturing has 9,839,969 shares of common stock outstanding. The current share price is $57.28, and the book value per share is $4.24. Filer Manufacturing also has two bond issues outstanding. The first bond issue has a face value of $53,310,475, has a 0.07 coupon, matures in 13 years and sells for 81 percent of par. The second issue has a face value of $67,670,598, has a 0.07 coupon, matures in 8 years, and sells for 85 percent of par. What is Filer's weight of equity on a market value basis? Enter the answer with 4 decimals (e.g. 0.2345)
Filer Manufacturing has 9,986,779 shares of common stock outstanding. The current share price is $78.51, and the book value per share is $3.11. Filer Manufacturing also has two bond issues outstanding. The first bond issue has a face value of $74,591,265, has a 0.08 coupon, matures in 18 years and sells for 85 percent of par. The second issue has a face value of $56,282,887, has a 0.05 coupon, matures in 26 years, and sells for 94 percent of par. The most recent dividend was $0.56 and the dividend growth rate is 0.05. Assume that the overall cost of debt is the weighted average of that implied by the two outstanding debt issues. Both bonds make semiannual payments. The tax rate is 0.3. What is Filer's cost of equity? Enter the answer with 4 decimals (e.g. 0.2345)
Florida Manufacturing has 7.3 million shares of common stock outstanding. The current share price is $43, and the book value per share is $3. Filer Manufacturing also has two bond issues outstanding. The first bond issue has a face value of $68.0 million and a coupon rate of 6.0 percent and sells for 109.3 percent of par. The second issue has a face value of $58.0 million and a coupon rate of 6.5 percent and sells for 106.9 percent of par. The first issue matures in 7 years, the second in 28 years. Suppose the company’s stock has a beta of 1.4. The risk-free rate is 2.1 percent, and the market risk premium is 6.0 percent. Assume that the overall cost of debt is the weighted average implied by the two outstanding debt issues. Both bonds make semiannual payments. The tax rate is 34 percent. What is the company’s WACC? (Do not round intermediate calculations and round your answer to 2 decimal places. (e.g., 32.16))
Hero Manufacturing has 8.5 million shares of common stock outstanding. The current share price is $77 and the book value per share is $6. The company also has two bond issues outstanding. The first bond issue has a face value of $70 million, a coupon rate of 6.6 percent and sells for 108.5 percent of par. The second issue has a face value of $55.3 million, a coupon rate of 7.8 percent and sells for 112.3 percent of par. The first issue matures in 10 years, the second in 28 years. Suppose the company’s stock has a beta of 1.4. The risk-free rate is 2.8 percent and the market risk premium is 6.9 percent. Assume that the overall cost of debt is the weighted average implied by the two outstanding debt issues. Both bonds make semiannual payments. The tax rate is 22 percent. What is the company’s WACC?
Company A has 279,000 basic shares outstanding and 26,000 outstanding options and warrants. The exercise price of these options is $3.75. The company also has $200,000 of convertible bonds with an effective conversion price of $4.00. The average market share price for the reporting period is $7.50. What is the diluted shares outstanding using the treasury stock method & if-converted methods

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