You are given the following information for Lightning Power Company. Assume the company's tax rate is 21 percent.Debt:Common stock:Preferred stock:Market:16,000 6.5 percent coupon bonds outstanding, $1,000 par value, 27 yearsto maturity, selling for 105 percent of par; the bonds make semiannualpayments.490,000 shares outstanding, selling for $67 per share; beta is 1.18.21,500 shares of 4.3 percent preferred stock outstanding, a $100 parvalue, selling for $88 per share.6 percent market risk premium and 5.4 percent risk-free rate.What is the company's WACC?Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.Answer is complete but not entirely correct.WACC8.53%

Step 1:First, the market value of all the debts and equity are computed,Then the weights are…

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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a. A bond that has a $1,000 par value (face value) and a contract or coupon interest rate of 10.2 percent. Interest payments are $51.00 and are paid semiannually. The bonds have a current market value of $1,123 and will mature in 10 years. The firm's marginal tax rate is 34 percet. b. A new common stock issue that paid a $1.79 dividend last year. The firm's dividends are expected to continue to grow at 7.3 percent per year, forever. The price of the firm's common stock is now $27.87. c. A preferred stock that sells for $132, pays a dividend of 8.7 percent, and has a $100 par value. d. A bond selling to yield 11.3 percent where the firm's tax rate is 34 percent. Question content area bottom Part 1 a. The after-tax cost of debt is_____%
Information on Lightning Power Company, is shown below. Assume the company's tax rate is 22 percent. 18,200 6.1 percent coupon bonds outstanding, $1,000 par value, 25 years to maturity, selling for 107.8 percent of par; the bonds make semiannual payments. 620,000 shares outstanding, selling for $85.25 per share; beta is 1.15. 28,500 shares of 4.25 percent preferred stock outstanding, currently selling for $92.70 per share. The par value is $100. 6.8 percent market risk premium and 3.4 percent risk-free rate. Debt: Common stock: Preferred stock: Market: What is the company's cost of each form of financing? Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. Cost of equity Aftertax cost of debt Cost of preferred stock Calculate the company's WACC. Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. WACC % % 4.59 % 9.18 %
Suppose Westerfield Co. has the following financial information: Debt: 900, 000 bonds outstanding with a face value of $1,000. The bonds currently trade at 85% of par and have 12 years to maturity. The coupon rate equals 7%, and the bonds make semiannual interest payments. Preferred stock: 600,000 shares of preferred stock outstanding; currently trading for $108 per share, paying a dividend of $9 annually. Common stock: 25,000,000 shares of common stock outstanding; currently trading for $185 per share. Beta equals 1.22. Market and firm information: The expected return on the market is 9%, the risk - free rate is 5%, and the tax rate is 21 %. Calculate the weight of debt in the capital structure. (Enter percentages as decimals and round to 4 decimals)
Given the following information for Huntington Electric Co., *Debt: 6,000 of 8 percent coupon bonds outstanding, $1,000 par value, 10 years to maturity, selling for 108 percent of par; the bonds make annual payments. *Preferred stock: 8000 shares of 7.2% preferred stock dividend rate, selling at $90 per share. *Common stock: 500,000 shares outstanding, selling for $70 per share; the beta is 1.12. *Market data: 10 percent market rate of return and 5 percent risk-free rate, and the corporate tax rate of 30%. What is the after tax, WACC of this company? What is the after-tax, WACC of this company? Group of answer choices .9.6639% 8% 9.9802% 10%
Charter Corp. has issued 1,554 debentures with a total principal value of $1,554,000. The bonds have a coupon interest rate of 9%. a. What dollar amount of interest per bond can an investor expect to receive each year from Charter? b. What is Charter's total interest expense per year associated with this bond issue? c. Assuming that Charter is in a 39% corporate tax bracket, what is the company's net after-tax interest cost associated with this bond issue?
Calculate the weighted average cost of capital for the following Dunkie company (WACC). The Dunkie company's bond is currently selling for 102% of par. The bond is a semi-annual, 20-year bond issued 7 years ago with a face value of $1000.00 with a coupon of 8%. There were 95,000 bonds issued. The company's corporate tax rate is 32%. The Dunkie company has issued both preferred and common stock. The preferred stock pays $3.35 per share and is selling for $97.00. There are 100,000 shares of preferred stock. The company has a beta of .95. You've calculated the return of the market to be 9.5% and the market risk premium is 5.75%. The Dunkie company stock is selling for $15.75 and there are 5,000,000 shares outstanding. What is the weighted average cost of capital for the Dunkie company?
You are given the following information for Lightning Power Company. Assume the company's tax rate is 23 percent. 23,000 7.2 percent coupon bonds outstanding, $1,000 par value, 19 years to maturity, selling for 106 percent of par; the bonds make semiannual payments. 560,000 shares outstanding, selling for $74 per share; beta is 1.17. 25,000 shares of 5 percent preferred stock outstanding, a $100 par value, selling for $95 per share. 7 percent market risk premium and 5.1 percent risk-free rate. Debt: Common stock: Preferred stock: Market: What is the company's WACC? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. WACC %
The New Dance LLC. has 10,000 perpetual bonds outstanding, a par value of $1000. Also, The bonds have a coupon rate of 5% paid annually. The nomial interest rate on these bonds is 8%. This LLC. also has 2 million shares of stock outstanding with a market price of $30/share. What is this LLC.'s market value debt equity ratio?

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