VD Industries capital structure consists of 43% debt and the remaining structure in equity. Four years ago, the firm issued 20 year, 10% semi-annual coupon bonds with a $1,000 par value that trade for $850 in currentmarkets. If VD has a cost of equity of 12% and pays a marginal tax rate of 20%, what is their WACC?O 9.11%O 10.02%O 8.28%O 11.02%O 12.12%

The WACC of a company refers to the average profits that the company provides to all its…

Answered: VD Industries capital structure…

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 is an all-equity firm that has projected earnings before interest and taxes, $490,000, forever The current cost of equity is 16% and the tax rate is 21%. The company is in the process of issuing $1,000,000 of bonds at par that carry a 6% annual coupon. What is the levered value of the firm? O a. $2,424,125 O b. $2,363,849 O c. $2,142,793 O d. $2,629,375
You are given the following information for Huntington Power Co. Assume the company's tax rate is 40 percent. Debt: Common stock: 5,000 6.2 percent coupon bonds outstanding, $1,000 par value, 20 years to maturity, selling for 109 percent of par; the bonds make semiannual payments. 460,000 shares outstanding, selling for $56 per share; the beta is .96. Market: 5 percent market risk premium and 4.6 percent risk-free rate. What is the company's WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) WACC %
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