Fundamentals Of Corporate Finance, 9th Edition
9th Edition
ISBN: 9781260052220
Author: Richard Brealey; Stewart Myers; Alan Marcus
Publisher: McGraw-Hill Education
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Chapter 13, Problem 5QP
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To compute: The weighted average cost of capital (WACC) of the company.
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The total book value of WTC’s equity is $14 million, and book value per share is $28. The stock has a market-to-book ratio of 1.5, and the cost of equity is 9%. The firm’s bonds have a face value of $10 million and sell at a price of 110% of face value. The yield to maturity on the bonds is 5%, and the firm’s tax rate is 21%. What is the company’s WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
he total book value of WTC’s equity is $7 million, and book value per share is $14. The stock has a market-to-book ratio of 1.5, and the cost of equity is 12%. The firm’s bonds have a face value of $4 million and sell at a price of 110% of face value. The yield to maturity on the bonds is 9%, and the firm’s tax rate is 21%. What is the company’s WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
WACC= ______%
The total book value of WTC's equity is $12 million, and book value per share is $24. The stock has a market-to-book ratio of 1.5, and
the cost of equity is 14%. The firm's bonds have a face value of $8 million and sell at a price of 110% of face value. The yield to maturity
on the bonds is 9%, and the firm's tax rate is 21%. What is the company's WACC?
Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.
WACC
%
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Fundamentals Of Corporate Finance, 9th Edition
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- The total book value of WTC's equity is $13 million, and book value per share is $20. The stock has a market-to-book ratio of 1.5, and the cost of equity is 9%. The firms bonds have a face value of $9 million and sell at a price of 110% of face value. The yield to maturity on the bonds is 7% andthe firm's tax rate is 21%. What is the company's WACC? (Don't round intermediate calculations, enter final answers as a percent rounded to 2 decimal places.)arrow_forwardTell Corp. has a total book value of equity of $10 million and a book value per share of $20. The stock sells for a price of $30 per share, and the cost of equity is 15%. The firm's bonds have a par value of $5 million and sel at a price of 110% of par. The yield to maturity on the bonds is 9%, and the firms tax rate is 30%. What is the firms Weighted Average Cost of Capital? A. 11.91% B. 12.10% C. 12.67% D. 12.82 E. 13.30arrow_forwardThe total book value of the firm’s equity is 15 million; the book value per share is 35. The stock sells for a price of 45 per share, and the cost of equity is 16 percent. The firm’s bonds have a par value of 8 million and sell at a price of 112 percent of par. The yield to maturity on the bonds is 8 percent, and the firm’s tax rate is 30 percent.Find the WACC of Pakistan State Oil Company?arrow_forward
- (12) The total book value of WTC's equity is $10 million, and book value per share is $20. The stock has a market-to-book ratio of 1.5, and the cost of equity is 15%. The firm's bonds have a face value of $5 million and sell at a price of 110% of face value. The yield to maturity on the bonds is 9%, and the firm's tax rate is 21%. What is the company's WACC?arrow_forwardA firm has issued $25 million in long-term bonds that now have 8 years remaining until maturity. The bonds carry a 9% annual coupon but are selling in the market for $891.50. The firm also has $40 million in market value of ordinary shares. For cost of capital purposes, what portion of the firm is debt financed and what is the after-tax cost of debt, if the tax rate is 28%?arrow_forwardA company has $5 million in debt outstanding with a coupon rate of 12%. Currently, the yield to maturity (YTM) on these bonds is 14%. If the firm's tax rate is 40%, what is the company's after-tax cost of debt?A. 5.6%.B. 8.4%.c. 14.0%.arrow_forward
- Consider the following information for Federated Junkyards of America. Debt: $65,000,000 book value outstanding. The debt is trading at 86% of book value. The yield to maturity is 9%. Equity: 1,500,000 shares selling at $32 per share. Assume the expected rate of return on Federated’s stock is 18%. Taxes: Federated’s marginal tax rate is Tc = 0.21. Calculate the weighted-average cost of capital (WACC).arrow_forwardConsider the following information for Federated Junkyards of America. Debt: $76,000,000 book value outstanding. The debt is trading at 91% of book value. The yield to maturity is 10%. Equity: 2,600,000 shares selling at $43 per share. Assume the expected rate of return on Federated’s stock is 19%. Taxes: Federated’s marginal tax rate is Tc = 0.21. Calculate the weighted-average cost of capital (WACC). (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)arrow_forward. ABC Co. has $15 million of debt outstanding with a coupon rate of 9%. Currently, the yield to maturity on these bonds is 7%. If the firm’s tax rate is 35%, what is the after-tax cost of debt? A. 10.76% B. 5.85% C. 4.55% D. 5.40%arrow_forward
- mc attachedarrow_forwardABC Inc. borrows money at 8%, sells bonds at 5%, and the purchasers of common stock require 10% rate of return. If the company has borrowed $40 million, sold $60 million in bonds, and sold $100 million worth of common stocks, what is the Weighted Average Cost of Capital (WACC)? If the same company from the previous question used 7% ROR for loans, 7% ROR for bonds, and 12% ROR for stocks, and also used a 50% tax rate, what is the WACC?arrow_forwardA company has an outstanding bond issue with a 7.75% coupon, paid semiannually, a current maturity of 20 years, and it sells for $967.97. The firm's income tax rate is 40%, What should the firm's managers use as an after-tax cost of debt for cost of capital purposes? 4.85% 2.42% 8.08% 4.04 %arrow_forward
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