Lingenburger Cheese Corporation has 7.3 million shares of common stock outstanding, 265,000 shares of 4.5 percent preferred stockoutstanding, par value of $100; and 150,000 bonds with a semiannual coupon rate of 5.4 percent outstanding, par value $2,000 each.The common stock currently sells for $64 per share and has a beta of 1.20, the preferred stock has a par value of $100 and currentlysells for $92 per share, and the bonds have 16 years to maturity and sell for 106 percent of par. The market risk premium is 7.4 percent,T-bills are yielding 3.2 percent, and the company's tax rate is 22 percent.a. What is the firm's market value capital structure?Note: Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.b. If the company is evaluating a new investment project that has the same risk as the firm's typical project, what rate should the firmuse to discount the project's cash flows?Note: Do not round intermediate calculations enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.a. DebtPreferred stockEquityb. Discount rate8.61 %

WACC is the weighted average cost of capital and is weighted cost of equity, weighted cost of debt…

Answered: The common stock currently sells for…

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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MacG, Inc. has an equity market capitalization of $7,800,000. Its equity beta is 4.2. The risk-free rate and market return are expected to be 1.4% and 7.2%, respectively. MacG also has 3,500,000 in bonds that have a yield-to-maturity of 5.4%. If MacG faces a tax rate of 14%, which is the weighted average cost of capital for MacG? Edit View Insert Format Tools Table 12pt ✓ Paragraph В І U Al А ✓ T² V 20 ► V :
You are analysis Sasol stock and you have gathered the information in the table below. If the net debt of the firm increased by R20 million, what is the approximate FCFE? FCFF Interest after tax Tax rate FCFE growth Cost of equity R198m R15m 35% 3% 14% R1,950 R2,497 R203 R188.25 R208.25
The market value of Charcoal Corporation's common stock is $20 million, and the market value of its risk-free debt is $5 million. The beta of the company's common stock is 1.25, and the market risk premium is 8 percent. If the Treasury bill rate is 5 percent, what is the company's cost of capital? (Assume no taxes.) 15.0 percent 14.6 percent 13.0 percent 7.0 percent
6
Hook Industries's capital structure consists solely of debt and common equity. It can issue debt at rd = 9%, and its common stock currently pays a $2.75 dividend per share (Do = $2.75). The stock's price is currently $29.75, its dividend is expected to grow at a constant rate of 7% per year, its tax rate is 25%, and its WACC is 15.40%. What percentage of the company's capital structure consists of debt? Do not round intermediate calculations. Round your answer to two decimal places. %
Tyres Limited has asked you to calculate the return on its ordinary shares to help in its calculation of its weighted average cost of capital (WACC). Tyres has 10,000,000 ordinary shares on issue that have a beta of 1.63. The last dividend was $9.56, and dividends have been growing at 2.7% per year. If the risk-free rate is 1.98% and the return on the market is 9.1%. What is the required return on one of Tyres’s ordinary shares?.
29. Mackenzie Company has a price of $36 and will issue a dividend of $2.00 next year. It has a beta of1.2, the risk-free rate is 5.5%, and the market risk premium is estimated to be 5.0%. a. Estimate the equity cost of capital for Mackenzie. What ___% b. Under the CDGM, at what rate do you need to expect Mackenzie's dividends to grow to get the same equity cost of capital as in part (a)? What __% **round to two decimal places**
Hook Industries's capital structure consists solely of debt and common equity. It can issue debt at rd = 10%, and its common stock currently pays a $3.25 dividend per share (D0 = $3.25). The stock's price is currently $28.25, its dividend is expected to grow at a constant rate of 5% per year, its tax rate is 25%, and its WACC is 13.05%. What percentage of the company's capital structure consists of debt? Do not round intermediate calculations. Round your answer to two decimal places.
A firm is currently an all equity firm that has 510,000 shares of stock outstanding with a market price of $53.60 a share. The current cost of equity is 10.5 percent and the tax rate is 25 percent. The firm is considering adding $7.10million of debt with a coupon rate of 6 percent to its capital structure. The debt will be sold at par value. What is the levered value of the equity ?
Dorpac Corporation has a dividend yield of 1.4%. Its equity cost of capital is 7.8%, and its dividends are expected to grow at a constant rate. a. What is the expected growth rate of Dorpac's dividends? b. What is the expected growth rate of Dorpac's share price? a. What is the expected growth rate of Dorpac's dividends? The growth rate will be %. (Round to one decimal place.)
Hook Industries's capital structure consists solely of debt and common equity. It can issue debt at rd = 11%, and its common stock currently pays a $2.50 dividend per share (D0 = $2.50). The stock's price is currently $34.75, its dividend is expected to grow at a constant rate of 8% per year, its tax rate is 25%, and its WACC is 13.35%. What percentage of the company's capital structure consists of debt? Do not round intermediate calculations. Round your answer to two decimal places.
Hook Industries's capital structure consists solely of debt and common equity. It can issue debt at rd = 12%, and its common stock currently pays a $2.00 dividend per share (D0 = $2.00). The stock's price is currently $26.00, its dividend is expected to grow at a constant rate of 6% per year, its tax rate is 25%, and its WACC is 13.30%. What percentage of the company's capital structure consists of debt? Do not round intermediate calculations. Round your answer to two decimal places.

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