You have the following balance sheet and information about FedEx: Balance Sheet: Assets Liabilities & Shareholders’ Equity Current Assets $31,000,000 Current Liabilities $28,000,000 PP&E $197,000,000 Long-term Debt (Corporate Bonds) $105,000,000 Equity $95,000,000 Total $228,000,000 Total $228,000,000 FedEx has 16 million shares outstanding. FedEx’s shares have a beta of 1.6 and are currently trading for $15 per share. The expected market risk premium is 7%. The risk-free rate is 1%. The debt is trading at 101% of book value. The coupon rate on existing debt is 5% The yield to maturity on existing debt is 3%. The corporate tax rate is 21%. Compute FedEx’s weighted-average cost of capital (WACC).
You have the following balance sheet and information about FedEx: Balance Sheet: Assets Liabilities & Shareholders’ Equity Current Assets $31,000,000 Current Liabilities $28,000,000 PP&E $197,000,000 Long-term Debt (Corporate Bonds) $105,000,000 Equity $95,000,000 Total $228,000,000 Total $228,000,000 FedEx has 16 million shares outstanding. FedEx’s shares have a beta of 1.6 and are currently trading for $15 per share. The expected market risk premium is 7%. The risk-free rate is 1%. The debt is trading at 101% of book value. The coupon rate on existing debt is 5% The yield to maturity on existing debt is 3%. The corporate tax rate is 21%. Compute FedEx’s weighted-average cost of capital (WACC).
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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Question
You have the following
Balance Sheet:
|
Assets |
Liabilities & Shareholders’ Equity |
||
|
Current Assets |
$31,000,000 |
Current Liabilities |
$28,000,000 |
|
PP&E |
$197,000,000 |
Long-term Debt (Corporate Bonds) |
$105,000,000 |
|
|
|
Equity |
$95,000,000 |
|
Total |
$228,000,000 |
Total |
$228,000,000 |
- FedEx has 16 million shares outstanding.
- FedEx’s shares have a beta of 1.6 and are currently trading for $15 per share.
- The expected market risk premium is 7%.
- The risk-free rate is 1%.
- The debt is trading at 101% of book value.
- The coupon rate on existing debt is 5%
- The yield to maturity on existing debt is 3%.
- The corporate tax rate is 21%.
Compute FedEx’s weighted-average cost of capital (WACC).
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