Tencent Corporation has a target capital structure of 70 percent common stock,5 percent preferred stock, and 25 percent debt. It's cost of equity is 11 percent, the cost of preferred stock is 5 percent, and the pre-tax cost of debt is 6 percent. The relevant tax rate is 23 percent. a. What is the company's WACC? b. What is the after-tax cost of debt?

Tencent Corporation has a target capital structure of 70 percent common stock,5 percent preferred stock, and 25 percent debt. It's cost of equity is 11 percent, the cost of preferred stock is 5 percent, and the pre-tax cost of debt is 6 percent. The relevant tax rate is 23 percent. a. What is the company's WACC? b. What is the after-tax cost of debt?

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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A company has debt, equity share and overdraft financing. The overdraft is used to finance the day-to-day activities of the company when necessary. The after-tax cost of debt is 12%, the cost of equity is 20% and the after-tax cost of the overdraft is 18%. The market value of debt is R1 000 000, the market value of equity is R2 000 000 and the market value of the overdraft is R500 000. Calculate the company’s weighted average cost of capital (rounded to two decimal places). a. 18.33% b. 17.33% c. 18.43% d. 19.33% e. 17.43%
Mullineaux Corporation has a target capital structure of 46 percent common stock, 5 percent preferred stock, and the balance in debt. Its cost of equity is 15.8 percent, the cost of preferred stock is 8.3 percent, and the aftertax cost of debt is 6.8 percent. What is the WACC given a tax rate of 23 percent?
A firm is financed 63% by common stock, 10% by preferred stock and 15% by debt. The required return is 17% on the common, 11% on the preferred, and 4% on the debt. If the tax rate is 21% what is the WACC?
Sandhill Co. has a capital structure, based on current market values, that consists of 25 percent debt, 19 percent preferred stock, and 56 percent common stock. If the returns required by investors are 8 percent, 12 percent, and 15 percent for the debt, preferred stock, and common stock, respectively, what is Sandhill’s after-tax WACC? Assume that the firm’s marginal tax rate is 28 percent.
Paraglide Corp. has a target debt-equity ratio of .48. Its cost of equity is 16.4 percent, and its pretax cost of debt is 8.2 percent. If the tax rate is 34 percent, what is the company's WACC? 11.28 percent 11.72 percent 13.20 percent 12.84 percent 12.91 percent
K Pfd Company has debt with a yield to maturity of 7.01%, a cost of equity of 14.51%, and a cost of preferred stock of 9.92%. The market values of its debt, preferred stock, and equity are $10.3 million, $2.7 million, and $14.6 million, respectively, and its tax rate is 30%. What is this firm's after-tax WACC? Note: Assume that the firm will always be able to utilize its full interest tax shield. Pfd's after-tax WACC is %. (Round to two decimal places.)
Suppose that TapDance, Inc.’s capital structure features 75 percent equity, 25 percent debt, and that its before-tax cost of debt is 9 percent, while its cost of equity is 14 percent. The appropriate weighted average tax rate is 21 percent. What will be TapDance’s WACC? (Round your answer to 2 decimal places.)
Suppose that MNINK Industries’ capital structure features 63 percent equity, 8 percent preferred stock, and 29 percent debt. Assume the before-tax component costs of equity, preferred stock, and debt are 11.40 percent, 9.30 percent, and 8.00 percent, respectively.What is MNINK’s WACC if the firm faces an average tax rate of 21 percent and can make full use of the interest tax shield? (Round your answer to 2 decimal places.)
A firm is financed 75% by common stock, 9% by preferred stock and 18% by debt. The required return is 11% on the common, 9% on the preferred, and 4% on the debt. If the tax rate is 21% what is the WACC?
Suppose that TapDance, Inc.'s capital structure features 65 percent equity, 35 percent debt, and that its before-tax cost of debt is 8 percent, while its cost of equity is 13 percent. The appropriate weighted average tax rate is 21 percent. What will be TapDance's WACC? (Round your answer to 2 decimal places. Write your answer in percentage.)
Bulldogs Inc., that has an applicable tax rate of 25%, is half funded by the creditors and the remaining by ordinary shareholders. The Weighted Average cost of Capital of the firm is 20%. Based on the discounted cash flow model the Bulldogs Inc. computed its cost of equity at 10%. What is the after-tax cost of debt? (In percentage, type the percentage sign on your answer)
Salalah Mineral water has found that its cost of common equity capital is 18 percent and its cost of debt capital is 8 percent . If the firm in financed with 60 percent common shares and 40 percent debt then what is the after - tax weighted average cost of capital for salalah Mineral water if it is subject to a 40 percent marginal tax rate ? Select one A.11.50 b . None of these C. 1457 d . 1272

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