Question 14Your company has compiled the following data which is based on current costsrelative to its sources of external capital ie long-term debt, preferred stock andcommon stock equity for various ranges of financing.Source of CapitalLong-term debtAfter-tax CostRange of Total New Financing4 %0 to169759481697595 to3259148123259149 toabovePreferred stock170 to93603422936035 toaboveCommon stock equity180 to1141333211141334 to2808705252808705 to3549127263549127 toaboveCurrent retained earnings in coming yearCost of retained earnings based on current earnings62898818 %The target capital structure proportions are:Target capital structureLong-term debt32 %Preferred stock11 %Equity57 %Calculate the WACC prior to the firm exhausting its retained earningsAnswer3The firm expects its range of total new financing to beCalculate the WACC based on new range.3156574Answer3

The weighted average cost of capital (WACC) is a method for assessing a company's cost of capital…

Answered: Question 14 Your company has compiled…

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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3
FINANCE PLEASE ANSWER C & D
QUESTION 4 A Company with net operating earnings of shs 300,000 is attempting to evaluate a number of possible capital structures, given below. Which of the capital structures will you recommend and why? Show your analysis. Debt After tax-Cost of Cost of equity debt (%) (%) Capital structure 1 2 3 4 5 300,000 10 400,000 10 500,000 11 600,000 12 700,000 14 12 12.5 13.5 15 18 =
None
Given the following calculate the Cost of Equity. Beta Equity Risk Premium Pre-tax Yield on Debt Return on the Bond Market Return on the Stock Market Risk Free Rate Tax Weight of Debt in the Total Capital Structure Weight of Equity in the Total Capital Structure 1.5 5.5% 6.0% 4.5% 8.0% 2.5% 25.0% 25.0% 75.0%
Determine Garneau's optimal capital structure based on the following information: Debt EPS DPS Stock Price 20% 2.2 1.1 40.12 30% 2.4 40% 2.6 50% 2.8 Equity 80% 70% 60% 50% O a. 20% debt; 80% equity O b. 40% debt; 60% equity O c. 50% debt; 50% equity O d. 30% debt; 70% equity 1.2 1.3 1.4 41.34 40.52 39.42
Percent of capital structure: Preferred stock Common equity (retained earnings) Debt Additional information: Corporate tax rate Dividend, preferred Dividend, expected common Price, preferred Growth rate Bond yield Flotation cost, preferred Price, common 15% 45 40 35% Debt Preferred stock Common equity (retained earnings) Weighted average cost of capital $ 8.00 $ 3.50 $ 105.00 98 8% $ 10.40 $ 78.00 Calculate the weighted average cost of capital for Digital Processing Incorporated Note: Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places. Answer is complete but not entirely correct. Weighted Cost 5.20 % 8.33 11.50 25.03 %
أنت ۱۲ أبریل 8:۲۹ م Financial Plan |Components Debt |Equity Cost Weights Weighted Cost 7.15% 5.15% Weighted Average Cost of Capital 55% FIND Debt Equity 9.90% 60% 11.50% Weighted Average Cost of Capital FIND Debt 150000 Equity 450000 7.15% C 5.15% Weighted Average Cost of Capital 7.15% 5. 15% Weighted Average Cost of Capital FIND Debt 300000 Equity 300000 FIND Answer the following questions: FIND weighted Average Capital for Financial Plan C s.650% FIND weighted Average Capital for Financial Plan A 6.050% FIND weighted Average Capital for Financial Plan B 10.540% FIND weighted Average Capital for Financial Plan D 6,150% O O D
Table 9.1 A firm has determined its optimal capital structure which is composed of the following sources and target market value proportions. Source of Capital Long-term debt Preferred stock Common stock equity Target Market Proportions OA. 8.13 percent OB. 4.67 percent OC. 8 percent O D. 3.25 percent 20% 10 70 Debt: The firm can sell a 12-year, $1,000 par value, 7 percent bond for $960. A flotation cost of 2 percent of the face value would be required in addition to the discount of $40. Preferred Stock: The firm has determined it can issue preferred stock at $75 per share par value. The stock will pay a $10 annual dividend. The cost of issuing and selling the stock is $3 per share. Common Stock: A firm's common stock is currently selling for $18 per share. The dividend expected to be paid at the end of the coming year is $1.74. Its dividend payments have been growing at a constant rate for the last four years. Four years ago, the dividend was $1.50. It is expected that to sell, a new…

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