WACCDavid Ortiz Motors has a target capital structure of 30% debt and 70% equity. The yield to maturity on the company's outstanding bonds is 12%, and the company'stax rate is 25%. Ortiz's CFO has calculated the company's WACC as 13.2%. What is the company's cost of equity capital? Round your answer to the nearest wholenumber.

Given , WAAC = 13.2% = 0.132 Wd = Weight of dept = 30% = 0.30We = weight of equity = 70% = 0.70 T =…

Answered: WACC David Ortiz Motors has a target…

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

See similar textbooks

Similar questions

URGENT PLEASE d. Calculate the firm's weighted average cost of capital using the capital structure weights shown in the following table . (Round answer to the nearest 0.01%)
WACC David Ortiz Motors has a target capital structure of 40% debt and 60% equity. The yield to maturity on the company's outstanding bonds is 7%, and the company's tax rate is 25%. Ortiz's CFO has calculated the company's WACC as 9.3%. What is the company's cost of equity capital? Round your answer to the nearest whole number. %
Bartlett Company's target capital structure is 40% debt, 15% preferred, and 45% common equity. The after-tax cost of debt is 6.00%, the cost of preferred is 7.50%, and the cost of common using reinvested earnings is 12.75%. The firm will not be issuing any new stock. You were hired as a consultant to help determine their cost of capital. What is its WACC? a. 9.26% b. 9.83% c. 10.12% d. 9.54% e. 8.98%
Crowley Company has a capital structure with 30% debt at a 9% interest rate. Its beta is 1.3, the risk-free rate is 1.5%, and the market risk premium is 8%. The company has no preferred stock. Its combined federal-plus-state tax rate is 25%. a. Calculate the company's cost of equity b. Calculate the company's weighted average cost of capital c. Calculate he the company’s unlevered cost of equity
Abacus Company has 30% debt and 70% equity. The borrowing rate is 12%. (1) If you own 5% of the stock of Abacus, what is your dollar return if the overall capitalization rate, Ko, is 20%? (2) What is the implied required rate of return on equity if the total value of the firm is 1,500,000? Select one: a. None of the other three answers b. Dollar return=246000. c. Dollar return3D12300. d. Dollar return=54000.
The capital structure of ABC Company is: Debt 40%. Equity 60%. The cost of debt is 13%. The cost of equity is 16.5%. What is the weighted average cost of capital for ABC Company? Show your calculations
EBOOK Terrell Trucking Company is in the process of setting its target capital structure. The CFO believes that the optimal debt-to-capital ratio is somewhere between 20% and 50%, and her staff has compiled the following projections for EPS and the stock price at various debt levels: Projected EPS Debt/Capital Ratio 20% 30 40 50 Projected Stock Price $3.30 $32.00 3.55 38.00 3.70 35.50 3.55 34.00 Assuming that the firm uses only debt and common equity, what is Terrell's optimal capital structure? Choose from the options provided above. Round your answers to two decimal places. % debt % equity At what debt-to-capital ratio is the company's WACC minimized? Choose from the options provided above. Round your answer to two decimal places.
Intro Munich Re Inc. is expected to pay a dividend of $4.82 in one year, which is expected to grow by 4% a year forever. The stock currently sells for $69 a share. The before-tax cost of debt is 7% and the tax rate is 34%. The target capital structure consists of 20% debt and 80% equity. Part 1 What is the company's weighted average cost of capital? 3+ decimals Submit
Accounting problem.....
show all solution in the problem given
The company’s capital structure is as follows: Debt Weight 25%, Preferred Stock Weight 25%, Common equity Weight 50%. The cost of debt is 12%, the cost of preferred stock is 15% and the cost of common equity is 18%. Calculate the company’s weighted average cost of capital.Select one:a. 15.75%b. 35.75%c. None of the optionsd. 25.75%e. 55.75%
Tiger Valley Inc recently had you estimate the cost of each of its capital sources. The firm typically finances with a combination of long-term debt, preferred stock, and common equity. The firm has a target of 40% debt financing and 15% preferred stock financing with the remainder of funds being raised from common equity. The after-tax cost of preferred stock has been estimated to be 4.4% while the after-tax cost of long-term debt has been estimated to be 5.2%. Due to its riskiness, the after-tax cost of equity has been estimated at a much higher rate of 12.8%. Estimate the firm’s WACC. Assume a tax rate of 40%.

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS