Sharify Inc uses bond, common, and preferred shares to finance their operations. 1,000 bonds with a 6.5% semi-annual coupon rate, the bond is priced to have a YTM of 6% (semi-annually compounded APR) with 6 years left to maturity. 39,000 shares of common stock with a market value of $65 per share. The beta for Sharify Inc. common stock is 1.8. 5,000 shares of preferred stock that have a 7% dividend yield. The shares have a market value of $49 per share, and a face value of $100. Suppose the average return on a 10-year Canadian government bond is 3.9%, and the return on the TSX Composite Index i 9.3%. What is the current price of the bond? What is Sharify Inc.'s WACC? Assume the tax rate is 32 %

Sharify Inc uses bond, common, and preferred shares to finance their operations. 1,000 bonds with a 6.5% semi-annual coupon rate, the bond is priced to have a YTM of 6% (semi-annually compounded APR) with 6 years left to maturity. 39,000 shares of common stock with a market value of $65 per share. The beta for Sharify Inc. common stock is 1.8. 5,000 shares of preferred stock that have a 7% dividend yield. The shares have a market value of $49 per share, and a face value of $100. Suppose the average return on a 10-year Canadian government bond is 3.9%, and the return on the TSX Composite Index i 9.3%. What is the current price of the bond? What is Sharify Inc.'s WACC? Assume the tax rate is 32 %

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

See similar textbooks

Similar questions

1) Bombay Inc has 8.5 million shares of common stock outstanding, 250,000shares of 5% preferred stock outstanding, and 135,000 7.5% semi-annualbonds outstanding, par value $1000 EACH. The common stock currently sellsfor $34 per share and has a beta of 1.25, the preferred stock currently sells for$91 per share, and the bonds have 15 years to maturity and sell for 114% ofpar. The market risk premium is 7.5%, T-bills are yielding 4%, and thecompany’s tax rate is 35%.a) Calculate the firm’s market value capital structure.b) Calculate the company WACCc) If Bombay Inc generates a 7.5% with this capital, is Bombay Incdestroying or adding value discuss.
1) KAPITAL Company has 50,000 bonds outstanding. The bonds are selling at 96% of face value, ($1,000) have a 7% coupon rate, pay interest semi-annually. There are 100,000 shares of $6.30 (dividend) preferred stock outstanding with a current market price of $66 a share. In addition, there are 1.15 million shares of common stock outstanding with a market price of $77 a share and a beta of 0.80. The common stock just paid $3.46 in dividends and it is expected to grow by 3% annually. The firm's marginal tax rate is 35%. The stock market return is 10% and the Treasury bill rate is 4%. Bond maturity is 8% (a) What is the cost of equity based on the dividend growth model? What is the cost of equity based on the security market line? Explain any difference with (a). What is the cost of financing using preferred stock? What is the after-tax cost of debt financing? What is the weighted average cost of capital, using the cost of equity-based (a)? Interpret your answer. Assume the company…
1) Bombay Inc has 8.5 million shares of common stock outstanding, 250,000shares of 5% preferred stock outstanding, and 135,000 7.5% semi-annualbonds outstanding, par value $1000 EACH. The common stock currently sellsfor $34 per share and has a beta of 1.25, the preferred stock currently sells for$91 per share, and the bonds have 15 years to maturity and sell for 114% ofpar. The market risk premium is 7.5%, T-bills are yielding 4%, and thecompany’s tax rate is 35%.a) Calculate the firm’s market value capital structure.b) Calculate the company WACCc) If Bombay Inc generates a 7.5% with this capital, is Bombay Incdestroying or adding value discuss.
Firm Z has issued 1,000,000 bonds. Each bond is priced at $929 and has a face value of $1000. It pays annual coupon payments and has a coupon rate of 3%. The bonds will mature in 20 years. Stock price of Firm Z is $10, and there are 50 million shares outstanding. There are 2 million shares of preferred stock, which offers $2 dividend and is priced at $40. Equity beta of Firm Z is 1.5 and current market portffolio yields 8% and the risk free rate is 2%. Corproate tax rate is 30%. Find the costs of debt, equity, preferred stock and WACC. Firm Z has invested $4 million in marketing campaign to assess the demand for the product Minish. This product will be in the market next year and will last five years. Revenues are projected to be $50 million per year along with expenses of $20 million. The firm spends $15 million immediately on equipment that will be depreciated using MACRS depreciation to zero. Additionally, it will use some fully depreciated existing equipment that has a market…
Firm Z has issued 1,000,000 bonds. Each bond is priced at $929 and has a face value of $1000. It pays annual coupon payments and has a coupon rate of 3%. The bonds will mature in 20 years. Stock price of Firm Z is $10, and there are 50 million shares outstanding. There are 2 million shares of preferred stock, which offers $2 dividend and is priced at $40. Equity beta of Firm Z is 1.5 and current market portffolio yields 8% and the risk free rate is 2%. Corproate tax rate is 30%. Find the costs of debt, equity, preferred stock and WACC. Please show your work.
The IPO Investment Bank has the following financing outstanding. Debt: 20,000 bonds with a coupon rate of 12 percent and a current price quote of 110; the bonds have 20 years to maturity. 190, 000 zero coupon bonds with a price quote of 20.5 and 30 years until maturity. Both bonds have a par value of $1,000 and semiannual coupons. Preferred stock: 110,000 shares of 10 percent preferred stock with a current price of $85, and a par value of $100. Common stock: 2,200, 000 shares of common stock; the current price is $71, and the beta of the stock is 1.45. Market: The corporate tax rate is 21 percent, the market risk premium is 5 percent, and the risk - free rate is 2 percent. What is the WACC for the company? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
The JIRAF Company has 1700 bonds outstanding that have a market price of $1200 each and a face value of $1000. floatation cost is 0.015 the bond pays coupon of 0.055 quarterly for 11 years. The company also has 6,00 shares of preferred stock at a market price of $40 and dividends 1.5 each par value 20 dollars. The common stock is priced at $29 a share it is undervalued by $1.5 and there are 70000 shares outstanding, par value is 5 dollars the stock paid this year $1.1 and will continue to grow at a rate of 0.035 TAXES ARE 0.25 what is the cost of debt after tax? what is the cost of PS what is the cost of common stock? what is the weight of the bond according to book value method what is the weight of the stock according to book value method what is the weight of preferred stock according to book value method what is the weight of preferred stock according to book value method
Suppose Westerfield Co. has the following financial information: Debt: 900, 000 bonds outstanding with a face value of $1,000. The bonds currently trade at 85% of par and have 12 years to maturity. The coupon rate equals 7%, and the bonds make semiannual interest payments. Preferred stock: 600,000 shares of preferred stock outstanding; currently trading for $108 per share, paying a dividend of $9 annually. Common stock: 25,000,000 shares of common stock outstanding; currently trading for $185 per share. Beta equals 1.22. Market and firm information: The expected return on the market is 9%, the risk - free rate is 5%, and the tax rate is 21 %. Calculate the weight of debt in the capital structure. (Enter percentages as decimals and round to 4 decimals)
Given the following information for Huntington Electric Co., *Debt: 6,000 of 8 percent coupon bonds outstanding, $1,000 par value, 10 years to maturity, selling for 108 percent of par; the bonds make annual payments. *Preferred stock: 8000 shares of 7.2% preferred stock dividend rate, selling at $90 per share. *Common stock: 500,000 shares outstanding, selling for $70 per share; the beta is 1.12. *Market data: 10 percent market rate of return and 5 percent risk-free rate, and the corporate tax rate of 30%. What is the after tax, WACC of this company? What is the after-tax, WACC of this company? Group of answer choices .9.6639% 8% 9.9802% 10%
Harvey LLC’s capital structure consists of a 25-year bond issued 5 years ago with a coupon of 6% and a par value of $14,000,000. The company’s main competitor just issued a similar bond paying 5%. The company has 1,000,000 common shares outstanding at a market price of $14.35 per share and a Beta from Yahoo Finance of 1.53. It has also issued 25,000 shares of preferred stock which is selling today at $235 per share and a annual dividend per share of 13.50. The firm has a 10 year $12,500,000 loan with annual payments at 6.25% interest that it received 2 years ago. The T-note rate is 1.9% and Money Magazine forecasts the return of the S&P 500 for this year at 8.5%. The tax rate for the company is 33%. Calculate the company’s WACC

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS