Use the following information to compute the weighted average cost of capital (WACC) of GoGo Inc. Debt information: The beta of GoGo Inc. stock is 1.5 Risk-free rate is 4% Market return is 15% GoGo's capital structure is 65% equity and 35% debt. The tax rate is 21%. GoGo's WACC is.. 14.62% 15.47% Bonds will mature in 9 years. The maturity value is $1,000. The coupon rate is 8%, with semiannual payments. The current bond price is $1,015. 12.20% 13.32%

Use the following information to compute the weighted average cost of capital (WACC) of GoGo Inc. Debt information: The beta of GoGo Inc. stock is 1.5 Risk-free rate is 4% Market return is 15% GoGo's capital structure is 65% equity and 35% debt. The tax rate is 21%. GoGo's WACC is.. 14.62% 15.47% Bonds will mature in 9 years. The maturity value is $1,000. The coupon rate is 8%, with semiannual payments. The current bond price is $1,015. 12.20% 13.32%

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

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Quantitative Problem: Currently, Meyers Manufacturing Enterprises (MME) has a capital structure consisting of 35% debt and 65% equity. MME's debt currently has a 6.5% yield to maturity. The risk-free rate (rRF) is 4.5%, and the market risk premium (rM – rRF) is 5.5%. Using the CAPM, MME estimates that its cost of equity is currently 12.6%. The company has a 40% tax rate. a. What is MME's current WACC? Do not round intermediate calculations. Round your answer to two decimal places. % b. What is the current beta on MME's common stock? Do not round intermediate calculations. Round your answer to four decimal places. c. What would MME's beta be if the company had no debt in its capital structure? (That is, what is MME's unlevered beta, bU?) Do not round intermediate calculations. Round your answer to four decimal places. MME's financial staff is considering changing its capital structure to 45% debt and 55% equity. If the company went ahead with the proposed change, the…
Company Y has a target debt to equity ratio of 50%. Currently its book debt to equity ratio is 60% and it expects to revert to the target ratio very soon. The company has an after-tax market cost of debt of 9% and a market cost of equity of 20%. What is the WACC for the company? a. 14.33% b. 13.50% c. 12.33% d. 16.51%
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am. 121.
Estimate your firm's Weighted Average Cost of Capital. Assume that the current risk-free rate of interest is 3.6%, the market risk premium is 5.4%, and the corporate tax rate is 21%. ØDebt: Total book value: $10 million Total market value: $18 million Coupon rate: 5% Yield to Maturity: 4% Ø Common Stock: Total book value: $12 million Total market value: $16 million Beta 1.1 ØPreferred Stock: Total book value: $1 million Total market value: $6.5 million Price per share: $22 Dividend per share: $1 What is your firm's Weighted Average Cost of Capital (input as a raw number rounded to the 4 decimal places, i.e. if your answer is 7.1356%, input 7.1356)?
Kestrel, Inc. has an equity market capitalization of $6,500,000. Its equity beta is 2.4. The risk-free rate and market return are expected to be 1.4% and 7.2%, respectively. Kestrel also has $2,700,000 in bonds that have a yield-to-maturity of 4.8%. If Kestrel faces a tax rate of 18%, what is the weighted average cost of capital for Kestrel?
MM Ferguson's market value of common stock is $35.4 million, and its risk-free debt is $13.1 million in market value. The beta of the company's common stock is 1.55, and the market return is 10.2 percent. If the Treasury bill rate is 1.7 percent, what is the company's cost of capital? (Ignore taxes) A. 10.66% B. 11.32% C. 12.49% D. 13.31% E. 13.92%
The total market value of the common stock of Company A is $12 million, and the total value of its debt is $8 million. The treasurer estimates that the beta of the stock is currently 1.20 and that the market risk premium is 7.5%. The Treasury bill rate is 2.5%. Assume for simplicity that Company A debt is risk-free. The Company's tax rate is 28% . a) What is the pre-tax cost of capital for Company A? b) What is the WACC for Company A ?
Estimate your firm’s Weighted Average Cost of Capital. Assume that the current risk-free rate of interest is 3.5%, the market risk premium is 5%, and the corporate tax rate is 21%. Ø Debt: • Total book value: $10 million • Total market value: $12 million • Coupon rate: 6% • Yield to Maturity: 5% Ø Common Stock: • Total book value: $15 million • Total market value: $20 million • Beta = 1.1 Ø Preferred Stock: • Total book value: $2 million • Total market value: $2.5 million • Price per share: $20 • Dividend per share: $1.50 What is your firm’s Weighted Average Cost of Capital (input as a raw number, i.e. if your answer is 7.1%, input 7.1)?
A firm has 4000m in balance sheet debt (book value is equal to market value in this case) and 1000m in capitalized leases. Market value of equity is 10000m. You can use book value of debt to approximate its market value. If you were to use this information in the calculation of WACC, what is Wd? O 40.00% O 28.57% O 33.33% O 50.00%
5. SIROM Scientific Solutions has £12 million of outstanding equity and £4 million of bank debt. The bank debt costs 4% per year. The estimated equity beta is 1. If the market risk premium is 8% and the risk-free rate is 4%, calculate the weighted average cost of capital if the firm's tax rate is 30%. A. 8.73% B. 9.22% C. 9.70% D. 10.67%

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