The firm is financed with debt and equity. The book value of the debt is $10,000,000; the book value of the equity is $30,000,000. The stockholders require an 10.1% return. If the required return on the firm’s debt is 4% and the firm’s tax rate is 20%, what is the firm’s weighted average cost of capital (WACC)?
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The firm is financed with debt and equity. The book value of the debt is $10,000,000; the book value of the equity is $30,000,000. The stockholders require an 10.1% return. If the required return on the firm’s debt is 4% and the firm’s tax rate is 20%, what is the firm’s weighted average cost of capital (WACC)?
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- Suppose that your firm has a cost of equity of 10%, cost of preferred stock of 8%, and an after-tax cost of debt of 6%. If the firm has 30% in debt, 5% in preferred stock, and 65% in equity, what is the firm's weighted average cost of capital (WACC)? Tax rate is 20%.You are analyzing the cost of capital for a firm that is financed with $300 million of equity and $200 million of debt. The before-tax cost of debt capital for the firm is 4 percent. The beta of the company's stock is 1.5. The risk-free rate is 2%, and the market risk premium is 6%. Assume the firm's marginal tax rate is 30%, the company's weighted average cost of capital (WACC) is closest to O 7.7% O 5.9% O 8.2% O 6.4%Dillon Labs has asked its financial manager to measure the cost of each specific type of capital as well as the weighted average cost of capital. The weighted average cost is to be measured by using the following weights: 30% long-term debt, 10% preferred stock, and 60% common stock equity (retained earnings, new common�� stock, or both). The firm's tax rate is 23%. Debt : The firm can sell for $1030 a 14-year, $1,000-par-value bond paying annual interest at a 8.00% coupon rate. A flotation cost of 2% of the par value is required. Preferred stock: 9.00% (annual dividend) preferred stock having a par value of $100 can be sold for $92.An additional fee of $2 per share must be paid to the underwriters. Common stock: The firm's common stock is currently selling for $90 per share. The stock has paid a dividend that has gradually increased for many years, rising from $2.00 ten years ago to the $3.26 dividend payment, D0, that the company just recently made.…
- Dillon Labs has asked its financial manager to measure the cost of each specific type of capital as well as the weighted average cost of capital. The weighted average cost is to be measured by using the following weights: 30% long-term debt, 10% preferred stock, and 60% common stock equity (retained earnings, new common stock, or both). The firm's tax rate is 23%. Debt : The firm can sell for $1030 a 14-year, $1,000-par-value bond paying annual interest at a 8.00% coupon rate. A flotation cost of 2% of the par value is required. Preferred stock: 9.00% (annual dividend) preferred stock having a par value of $100 can be sold for $92.An additional fee of $2 per share must be paid to the underwriters. Common stock: The firm's common stock is currently selling for $90 per share. The stock has paid a dividend that has gradually increased for many years, rising from $2.00 ten years ago to the $3.26 dividend payment, D0, that the company just recently made.…A firm has a capital structure with $75 million in equity and $75 million in debt. The cost of equity capital is 10% and the pretax cost of debt is 7%. If the marginal tax rate of the firm is 35%, compute the weighted average cost of capital of the firm. A. 7.6% B. 7.3% C. 8.4% D. 8.0%A firm has EBIT of $30 million. It has debt of $100 million and the cost of debt is 7%. Its unlevered cost of capital is 10% and tax rate at 35%. a) What’s its unlevered firm value? b) What’s its levered firm value? c) What’s its equity value?
- K. Bell Jewelers wishes to explore the effect on its cost of capital of the rate at which the company pays taxes. The firm wishes to maintain a capital structure of 30% debt, 20% preferred stock, and 50% common stock. The cost of financing with retained earnings is 13%, the cost of preferred stock financing is 8%, and the before-tax cost of debt financing is 6%. Calculate the weighted average cost of capital (WACC) given a tax rate ofDillon Labs has asked its financial manager to measure the cost of each specific type of capital as well as the weighted average cost of capital. The weighted average cost is to be measured by using the following weights: 35% long-term debt, 20% preferred stock, and 45% common stock equity (retained earnings, new common stock, or both). The firm's tax rate is 21%. Debt The firm can sell for $1030 a 13-year, $1,000-par-value bond paying annual interest at a 7.00% coupon rate. A flotation cost of 2% of the par value is required. Preferred stock 8.5% (annual dividend) preferred stock having a par value of $100 can be sold for $90. An additional fee of $4 per share must be paid to the underwriters. Common stock The firm's common stock is currently selling for $60 per share. The stock has paid a dividend that has gradually increased for many years, rising from $2.75 ten years ago to the $5.41 dividend payment, D0, that the company just recently made. If the…Dillon Labs has asked its financial manager to measure the cost of each specific type of capital as well as the weighted average cost of capital. The weighted average cost is to be measured by using the following weights: 35% long-term debt, 20% preferred stock, and 45% common stock equity (retained earnings, new common stock, or both). The firm's tax rate is 21%. Debt The firm can sell for $1030 a 13-year, $1,000-par-value bond paying annual interest at a 7.00% coupon rate. A flotation cost of 2% of the par value is required. Preferred stock 8.5% (annual dividend) preferred stock having a par value of $100 can be sold for $90. An additional fee of $4 per share must be paid to the underwriters. Common stock The firm's common stock is currently selling for $60 per share. The stock has paid a dividend that has gradually increased for many years, rising from $2.75 ten years ago to the $5.41 dividend payment, D0, that the company just recently made. If the…
- The firm gets one-half of its capital from stock, and the other half from bonds. The debtholder’s required rate of return is 5%, the equity holder’s required rate of return is 10% and the firm’s tax rate is 2%. What is the weighted average cost of capital (WACC)? [Select the best answer, please.] 7.0 % 7.5 % 9.0 % 9.5 % 10.0 %Dillon Labs has asked its financial manager to measure the cost of each specific type of capital as well as the weighted average cost of capital. The weighted average cost is to be measured by using the following weights: 40% long-term debt, 15% preferred stock, and 45% common stock equity (retained earnings, new common stock, or both). The firm's tax rate is 26%. Debt The firm can sell for $1005 a 13-year, $1,000-par-value bond paying annual interest at a 6.00% coupon rate. A flotation cost of 2.5% of the par value is required. Preferred stock 7.00% (annual dividend) preferred stock having a par value of $100 can be sold for $98. An additional fee of $5 per share must be paid to the underwriters. Common stock The firm's common stock is currently selling for $80 per share. The stock has paid a dividend that has gradually increased for many years, rising from $2.50 ten years ago to the $4.92 dividend payment, D0, that the company just recently made. If…Dillon Labs has asked its financial manager to measure the cost of each specific type of capital as well as the weighted average cost of capital. The weighted average cost is to be measured by using the following weights: 40% long-term debt, 15% preferred stock, and 45% common stock equity (retained earnings, new common stock, or both). The firm's tax rate is 26%. Debt The firm can sell for $1005 a 13-year, $1,000-par-value bond paying annual interest at a 6.00% coupon rate. A flotation cost of 2.5% of the par value is required. Preferred stock 7.00% (annual dividend) preferred stock having a par value of $100 can be sold for $98. An additional fee of $5 per share must be paid to the underwriters. Common stock The firm's common stock is currently selling for $80 per share. The stock has paid a dividend that has gradually increased for many years, rising from $2.50 ten years ago to the $4.92 dividend payment, D0, that the company just recently made. If…