What is the weighted-average cost of capital for SKYE Corporation given the following information?1 millionEquity shares outstanding.Stock price per shareYield to maturity on debtBook value of interest-bearing debtCoupon interest rate on debtInterest rate on government bondsSKYE's equity betaHistorical excess return on stocksTax rateNote: Enter your answer to 1 decimal place.Weighted-average cost of capital%$ 207.68%$11 million983%0.755.5%45%

The weighted-average cost of capital (WACC) for SKYE Corporation is calculated as approximately 8.6%…

Answered: What is the weighted-average cost of…

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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Given the following information: Percent of capital structure: Debt Preferred stock Common equity (retained earnings) Additional information: Bond coupon rate Bond yield to maturity Dividend, expected common Dividend, preferred Price, common Price, preferred Flotation cost, preferred Growth rate Corporate tax rate 13% 11% Debt Preferred stock Common equity (retained earnings) Weighted average cost of capital $ 7.00 $ 14.00 $ 70.00 $110.00 $ 2.50 30% 10% 5 85 Calculate the Hamilton Corp's weighted cost of each source of capital and the weighted average cost of capital. (Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places.) Weighted Cost %
Railsplitters, Inc. has the following information for its capital structure: Instrument: Amount Issued Current Price YTM Bond A $500 Million 100.82 4.36% Bond B $350 Million 101.36 4.49% Common Stock 42.5 Million Shares $28.21 per share E(R ) Market = 8.65% β = 1.27 Expected Dividend = $1.95 Rf = 2.10% Growth Rate = 2.75% Given this information, if the tax rate of the firm is 30%, what is the after-tax cost of debt?
Assume ABC Corporation is a multinational company with the following financial information: Market value of equity (E): $500 million Market value of debt (D): $300 million Market value of preferred stock (PS): $50 million Cost of equity (Re): 10% Cost of debt (BTrd): 5% Corporate tax rate (Tc): 25% Cost of preferred stock ( Rps): 8% a. Calculate the WACC for ABC Corporation. Needs to be done in Excel
1. You are required to calculate the Weighted Average Cost of Capital (WACC) of Sethoo & Sons Limited from the data below: Black Limited Star Limited Number of Ordinary Shares (GH¢1.00) 2,000,000 1,000,000 Net Income available to Ordinary Shares 600,000 250,000 Gross Dividend 500,000 200,000 Market Price per share 3.00 2.00 Market value of Debts 3,000,000 1,500,000 Annual Growth rate of Dividend 12% 10% Gross Interest yield 10% 11% NOTE: The corporation tax rate is 50%. Debts are currently quoted at GH¢100 per block. 2. Explain why the Market Value Approach of calculating WACC is preferred to the Book Value Approach. 3. What are the uses of Weighted Average Cost of Capital?
Assume Skyler Industries has debt of $4,386,000 with a cost of capital of 7.5% and equity of $5,814,000 with a cost of capital of 10.2%. What is Skyler’s weighted average cost of capital? Round your intermediate calculations and final answer to 3 decimal places. _____%
Weighted average cost of capital A. The capital for investment of Executive Consultants, Inc. is as follows: Sources of capital Capital Debt (corporate bonds) $4,100,000 Prefferent shares $2,200,000 Common shares $2,800,000 B. To generate the $ 4.1 million of corporate bond capital, they issued bonds at $ 965 par value, with an annual coupon of $ 100 for the next 10 years, with a flotation cost of $ 10 per bond.C. The issue of preferred shares has a cost of $ 5 per share and will pay a dividend of 10% of its par value of $ 110 per preferred share.D. The risk-free rate is 3.45% and the market return is 11.25%. The company's beta coefficient is 1.23.E. Executive Consultants, Inc. has a tax liability of 35%.Problems:You must submit the procedure and all the calculations.1. Determine the capital structure of Executive Consultants, Inc.2. Calculate the cost of debt after taxes.3. Calculate the cost of preferred equity.
Can you help me with B and c?
Percent of capital structure: Preferred stock Common equity (retained earnings) Debt Additional information: Corporate tax rate Dividend, preferred Dividend, expected common Price, preferred Growth rate Bond yield Flotation cost, preferred Price, common 15% 45 40 35% Debt Preferred stock Common equity (retained earnings) Weighted average cost of capital $ 8.00 $ 3.50 $ 105.00 98 8% $ 10.40 $ 78.00 Calculate the weighted average cost of capital for Digital Processing Incorporated Note: Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places. Answer is complete but not entirely correct. Weighted Cost 5.20 % 8.33 11.50 25.03 %
Table 9.1 A firm has determined its optimal capital structure which is composed of the following sources and target market value proportions. Source of Capital Long-term debt Preferred stock Common stock equity Target Market Proportions OA. 8.13 percent OB. 4.67 percent OC. 8 percent O D. 3.25 percent 20% 10 70 Debt: The firm can sell a 12-year, $1,000 par value, 7 percent bond for $960. A flotation cost of 2 percent of the face value would be required in addition to the discount of $40. Preferred Stock: The firm has determined it can issue preferred stock at $75 per share par value. The stock will pay a $10 annual dividend. The cost of issuing and selling the stock is $3 per share. Common Stock: A firm's common stock is currently selling for $18 per share. The dividend expected to be paid at the end of the coming year is $1.74. Its dividend payments have been growing at a constant rate for the last four years. Four years ago, the dividend was $1.50. It is expected that to sell, a new…
Answer the following questions given the information below: Equity Information 40 million shares $100 per share Beta = 1.15 Market risk premium = 8% Risk-free rate = 3% Debt Information $1 billion in outstanding debt (face value) YTM = 9% What is the cost of equity? What is the cost of debt? What is the after-tax cost of debt? What are the capital structure weights? What is the WACC?
Compute the weighted average cost of capital given the information below. Book Value of Debt $2,500,000,000 Market Value of Debt $2,750,000,000 Book Value of Equity $3,250,000,000 Market Value of Equity $4,000,000,000 Dividend Milberg has just paid $3.25 Current stock price $40.50 Growth rate of dividends 6% Bond information Coupon rate = 4%, maturity = 20 years, maturity value =$1,000 and the current price is $985.25. Assume interest is paid semiannually. Flotation cost of equity 4% Flotation cost of debt 2% Questions 2 through 8 use the following information. Milberg Golf has decided to sell a new line of golf club. The clubs will sell for $1,100 per set and have a variable cost of 80% of revenues per set. The company has spent $450,000 for a marketing study that determined the company will sell 80,000 sets per year for seven years. The company also plans to offer a line of golf balls, which are expected to…
Percent of capital structure: Preferred stock Common equity (retained earnings) Debt Additional information: Corporate tax rate 45 25 15% 40 35% Dividend, preferred $ 10.00 Dividend, expected common $ 5.50 Price, preferred $ 98.00 Growth rate 10% Bond yield 11% Flotation cost, preferred $ 8.20 $ 77.00 Price, common Calculate the weighted average cost of capital for Digital Processing Incorporated Note: Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places. Answer is complete but not entirely correct. Debt Preferred stock Common equity (retained earnings) Weighted average cost of capital Weighted Cost 7.15% 11.14x 7.86 X 26.15 %

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