The WACC.

Question

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Answer 1

Question

Chapter 13, Problem 8QP

a.

Summary Introduction

To determine: The WACC.

a.

Expert Solution

Answer to Problem 8QP

The WACC is 11.27%.

Explanation of Solution

Determine the WACC

WACC=[((WeightDebt×RateDebt)×(1−Tax))+(WeightPreferred Stock×RatePreferred Stock)+(WeightEquity×RateEquity)]=[((24.30%×9%)×(1−0%))+(75.70%×12%)]=[0.02187+0.09084]=0.11271 or 11.27%

Therefore, the WACC is 11.27%.

b.

Summary Introduction

To determine: The cost of equity.

b.

Expert Solution

Answer to Problem 8QP

The cost of equity is 12.60%.

Explanation of Solution

Determine the weight of debt and equity

Weight of Debt=[Value of DebtMarket Value of Debt]=[$385.7 million+$200 million$1,585.70 million]=0.369364 or 36.94%

Weight of Equity=[Value of DebtMarket Value of Debt]=[$1,200 million−$200 million$1,585.70 million]=0.630636 or 63.06%

Therefore, the weight of debt is 36.94% and the weight of equity is 63.06%.

Determine the cost of equity

WACC=[((WeightDebt×RateDebt)×(1−Tax))+(WeightEquity×RateEquity)]11.27%=[((36.94%×9%)×(1−0%))+(63.06%×RateEquity)]RateEquity=[0.0794540.6306]=0.125997 or 12.60%

Therefore, the cost of equity is 12.60%.

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Answer 2

Question

Chapter 13, Problem 8QP

a.

Summary Introduction

To determine: The WACC.

a.

Expert Solution

Answer to Problem 8QP

The WACC is 11.27%.

Explanation of Solution

Determine the WACC

WACC=[((WeightDebt×RateDebt)×(1−Tax))+(WeightPreferred Stock×RatePreferred Stock)+(WeightEquity×RateEquity)]=[((24.30%×9%)×(1−0%))+(75.70%×12%)]=[0.02187+0.09084]=0.11271 or 11.27%

Therefore, the WACC is 11.27%.

b.

Summary Introduction

To determine: The cost of equity.

b.

Expert Solution

Answer to Problem 8QP

The cost of equity is 12.60%.

Explanation of Solution

Determine the weight of debt and equity

Weight of Debt=[Value of DebtMarket Value of Debt]=[$385.7 million+$200 million$1,585.70 million]=0.369364 or 36.94%

Weight of Equity=[Value of DebtMarket Value of Debt]=[$1,200 million−$200 million$1,585.70 million]=0.630636 or 63.06%

Therefore, the weight of debt is 36.94% and the weight of equity is 63.06%.

Determine the cost of equity

WACC=[((WeightDebt×RateDebt)×(1−Tax))+(WeightEquity×RateEquity)]11.27%=[((36.94%×9%)×(1−0%))+(63.06%×RateEquity)]RateEquity=[0.0794540.6306]=0.125997 or 12.60%

Therefore, the cost of equity is 12.60%.

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Answer 3

Question

Chapter 13, Problem 8QP

a.

Summary Introduction

To determine: The WACC.

a.

Expert Solution

Answer to Problem 8QP

The WACC is 11.27%.

Explanation of Solution

Determine the WACC

WACC=[((WeightDebt×RateDebt)×(1−Tax))+(WeightPreferred Stock×RatePreferred Stock)+(WeightEquity×RateEquity)]=[((24.30%×9%)×(1−0%))+(75.70%×12%)]=[0.02187+0.09084]=0.11271 or 11.27%

Therefore, the WACC is 11.27%.

b.

Summary Introduction

To determine: The cost of equity.

b.

Expert Solution

Answer to Problem 8QP

The cost of equity is 12.60%.

Explanation of Solution

Determine the weight of debt and equity

Weight of Debt=[Value of DebtMarket Value of Debt]=[$385.7 million+$200 million$1,585.70 million]=0.369364 or 36.94%

Weight of Equity=[Value of DebtMarket Value of Debt]=[$1,200 million−$200 million$1,585.70 million]=0.630636 or 63.06%

Therefore, the weight of debt is 36.94% and the weight of equity is 63.06%.

Determine the cost of equity

WACC=[((WeightDebt×RateDebt)×(1−Tax))+(WeightEquity×RateEquity)]11.27%=[((36.94%×9%)×(1−0%))+(63.06%×RateEquity)]RateEquity=[0.0794540.6306]=0.125997 or 12.60%

Therefore, the cost of equity is 12.60%.

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Answer 4

Question

Chapter 13, Problem 8QP

a.

Summary Introduction

To determine: The WACC.

a.

Expert Solution

Answer to Problem 8QP

The WACC is 11.27%.

Explanation of Solution

Determine the WACC

WACC=[((WeightDebt×RateDebt)×(1−Tax))+(WeightPreferred Stock×RatePreferred Stock)+(WeightEquity×RateEquity)]=[((24.30%×9%)×(1−0%))+(75.70%×12%)]=[0.02187+0.09084]=0.11271 or 11.27%

Therefore, the WACC is 11.27%.

b.

Summary Introduction

To determine: The cost of equity.

b.

Expert Solution

Answer to Problem 8QP

The cost of equity is 12.60%.

Explanation of Solution

Determine the weight of debt and equity

Weight of Debt=[Value of DebtMarket Value of Debt]=[$385.7 million+$200 million$1,585.70 million]=0.369364 or 36.94%

Weight of Equity=[Value of DebtMarket Value of Debt]=[$1,200 million−$200 million$1,585.70 million]=0.630636 or 63.06%

Therefore, the weight of debt is 36.94% and the weight of equity is 63.06%.

Determine the cost of equity

WACC=[((WeightDebt×RateDebt)×(1−Tax))+(WeightEquity×RateEquity)]11.27%=[((36.94%×9%)×(1−0%))+(63.06%×RateEquity)]RateEquity=[0.0794540.6306]=0.125997 or 12.60%

Therefore, the cost of equity is 12.60%.

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Answer 5

Chapter 13, Problem 8QP

a.

Summary Introduction

To determine: The WACC.

a.

Expert Solution

Answer to Problem 8QP

The WACC is 11.27%.

Explanation of Solution

Determine the WACC

WACC=[((WeightDebt×RateDebt)×(1−Tax))+(WeightPreferred Stock×RatePreferred Stock)+(WeightEquity×RateEquity)]=[((24.30%×9%)×(1−0%))+(75.70%×12%)]=[0.02187+0.09084]=0.11271 or 11.27%

Therefore, the WACC is 11.27%.

b.

Summary Introduction

To determine: The cost of equity.

b.

Expert Solution

Answer to Problem 8QP

The cost of equity is 12.60%.

Explanation of Solution

Determine the weight of debt and equity

Weight of Debt=[Value of DebtMarket Value of Debt]=[$385.7 million+$200 million$1,585.70 million]=0.369364 or 36.94%

Weight of Equity=[Value of DebtMarket Value of Debt]=[$1,200 million−$200 million$1,585.70 million]=0.630636 or 63.06%

Therefore, the weight of debt is 36.94% and the weight of equity is 63.06%.

Determine the cost of equity

WACC=[((WeightDebt×RateDebt)×(1−Tax))+(WeightEquity×RateEquity)]11.27%=[((36.94%×9%)×(1−0%))+(63.06%×RateEquity)]RateEquity=[0.0794540.6306]=0.125997 or 12.60%

Therefore, the cost of equity is 12.60%.

Answer 6

Chapter 13, Problem 8QP

a.

Summary Introduction

To determine: The WACC.

a.

Expert Solution

Answer to Problem 8QP

The WACC is 11.27%.

Explanation of Solution

Determine the WACC

WACC=[((WeightDebt×RateDebt)×(1−Tax))+(WeightPreferred Stock×RatePreferred Stock)+(WeightEquity×RateEquity)]=[((24.30%×9%)×(1−0%))+(75.70%×12%)]=[0.02187+0.09084]=0.11271 or 11.27%

Therefore, the WACC is 11.27%.

Answer 7

Chapter 13, Problem 8QP

a.

Summary Introduction

To determine: The WACC.

Answer 8

a.

Expert Solution

Answer to Problem 8QP

The WACC is 11.27%.

Answer 9

a.

Expert Solution

Answer 10

a.

Expert Solution

Answer 11

Expert Solution

Answer 12

Explanation of Solution

Determine the WACC

WACC=[((WeightDebt×RateDebt)×(1−Tax))+(WeightPreferred Stock×RatePreferred Stock)+(WeightEquity×RateEquity)]=[((24.30%×9%)×(1−0%))+(75.70%×12%)]=[0.02187+0.09084]=0.11271 or 11.27%

Therefore, the WACC is 11.27%.

Answer 13

b.

Summary Introduction

To determine: The cost of equity.

b.

Expert Solution

Answer to Problem 8QP

The cost of equity is 12.60%.

Explanation of Solution

Determine the weight of debt and equity

Weight of Debt=[Value of DebtMarket Value of Debt]=[$385.7 million+$200 million$1,585.70 million]=0.369364 or 36.94%

Weight of Equity=[Value of DebtMarket Value of Debt]=[$1,200 million−$200 million$1,585.70 million]=0.630636 or 63.06%

Therefore, the weight of debt is 36.94% and the weight of equity is 63.06%.

Determine the cost of equity

WACC=[((WeightDebt×RateDebt)×(1−Tax))+(WeightEquity×RateEquity)]11.27%=[((36.94%×9%)×(1−0%))+(63.06%×RateEquity)]RateEquity=[0.0794540.6306]=0.125997 or 12.60%

Therefore, the cost of equity is 12.60%.

Answer 14

b.

Summary Introduction

To determine: The cost of equity.

Answer 15

b.

Expert Solution

Answer to Problem 8QP

The cost of equity is 12.60%.

Answer 16

b.

Expert Solution

Answer 17

b.

Expert Solution

Answer 18

Expert Solution

Answer 19

Explanation of Solution

Determine the weight of debt and equity

Weight of Debt=[Value of DebtMarket Value of Debt]=[$385.7 million+$200 million$1,585.70 million]=0.369364 or 36.94%

Weight of Equity=[Value of DebtMarket Value of Debt]=[$1,200 million−$200 million$1,585.70 million]=0.630636 or 63.06%

Therefore, the weight of debt is 36.94% and the weight of equity is 63.06%.

Determine the cost of equity

WACC=[((WeightDebt×RateDebt)×(1−Tax))+(WeightEquity×RateEquity)]11.27%=[((36.94%×9%)×(1−0%))+(63.06%×RateEquity)]RateEquity=[0.0794540.6306]=0.125997 or 12.60%