Principles of Managerial Finance (14th Edition) (Pearson Series in Finance)
14th Edition
ISBN: 9780133507690
Author: Lawrence J. Gitman, Chad J. Zutter
Publisher: PEARSON
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Chapter 9, Problem 9.5WUE
Oxy Corporation uses debt,
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Oxy Corporation uses debt, preferred stock, and common stock to raise capital. The firm's capital structure targets the following proportions: debt,
53%;
preferred stock,
11%;
and common stock,
36%.
If the cost of debt is
5.5%,
preferred stock costs
7.6%,
and common stock costs
11.9%,
what is Oxy's weighted average cost of capital
(WACC)?
Oxy Corporation uses debt, preferred stock, and common stock to raise capital. The firm's capital structure targets the follwoing proportions: debt, 43%; preferred stock, 11%; and common stock, 46%. If the cost of debt is 6.4%, preferred stock costs 9.5%, and common stock cost 11.7%, what is Oxy's weighted average cost of capital (WACC)?
Oxy Corporation uses debt, preferred stock, and common stock to raise capital. The firm's capital structure targets the following proportions: debt, 58% ;preferred stock, 16% and common stock, 26%. If the cost of debt is 6.6% preferred stock costs 7.9% and common stock costs 10.3%, what is Oxy's weighted average cost of capital (WACC)?
Chapter 9 Solutions
Principles of Managerial Finance (14th Edition) (Pearson Series in Finance)
Ch. 9.1 - Prob. 1FOECh. 9.1 - What is the cost of capital?Ch. 9.1 - Prob. 9.2RQCh. 9.1 - Prob. 9.3RQCh. 9.1 - What are the typical sources of long-term capital...Ch. 9.2 - Prob. 9.5RQCh. 9.2 - Prob. 9.6RQCh. 9.2 - Prob. 9.7RQCh. 9.3 - How would you calculate the cost of preferred...Ch. 9.4 - What premise about share value underlies the...
Ch. 9.4 - How do the constant-growth valuation model and...Ch. 9.4 - Why is the cost of financing a project with...Ch. 9.5 - Prob. 1FOPCh. 9.5 - Prob. 9.13RQCh. 9.5 - Prob. 9.14RQCh. 9.5 - Prob. 9.15RQCh. 9 - Prob. 1ORCh. 9 - Learning Goals 3, 4, 5, 6 ST9-1 Individual...Ch. 9 - Prob. 9.1WUECh. 9 - Prob. 9.2WUECh. 9 - Prob. 9.3WUECh. 9 - Weekend Warriors Inc. has 35% debt and 65% equity...Ch. 9 - Oxy Corporation uses debt, preferred stock, and...Ch. 9 - Prob. 9.1PCh. 9 - Prob. 9.2PCh. 9 - Prob. 9.3PCh. 9 - Prob. 9.4PCh. 9 - The cost of debt Gronseth Drywall Systems Inc. is...Ch. 9 - After-tax cost of debt Bella Wans is interested in...Ch. 9 - Prob. 9.7PCh. 9 - Cost of preferred stock Determine the cost for...Ch. 9 - Prob. 9.9PCh. 9 - Prob. 9.10PCh. 9 - Retained earnings versus new common stock Using...Ch. 9 - The effect of tax rate on WACC K. Bell Jewelers...Ch. 9 - WACC: Market value weights The market values and...Ch. 9 - WACC: Book weights and market weights Webster...Ch. 9 - Prob. 9.15PCh. 9 - Cost of capital Edna Recording Studios Inc....Ch. 9 - Prob. 9.17PCh. 9 - Prob. 9.18PCh. 9 - Calculation of individual costs and WACC Lang...Ch. 9 - Weighted average cost of capital (WACC) American...Ch. 9 - Prob. 9.21PCh. 9 - Eco Plastics Company Since its inception, Eco...
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- Oxy Corporation uses debt, preferred stock, and common stock to raise capital. The firm's capital structure targets the following proportions: debt, 41%; preferred stock, 15%; and common stock, 44%. If the cost of debt is 7.5%, preferred stock costs 8.3%, and common stock costs 11.5%, what is Oxy's weighted average cost of capital (WACC)? Oxy's weighted average cost of capital (WACC) is%. (Round to two decimal places.)arrow_forwardThe calculation of WACC involves calculating the weighted average of the required rates of return on debt, preferred stock, and common equity, where the weights equal the percentage of each type of financing in the firm's overall capital structure. is the symbol that represents the cost of preferred stock in the weighted average cost of capital (WACC) equation. Wyle Co. has $2.7 million of debt, $2.5 million of preferred stock, and $2.1 million of common equity. What would be its weight on common equity? 0.34 O 0.37 O 0.31 O 0.29arrow_forwardThe calculation of WACC involves calculating the weighted average of the required rates of return on debt and equity, where the weights equal the percentage of each type of financing in the firm's overall capital structure. re . has $3.9 million of debt, $1 million of preferred stock, and $1.2 million of common equity. What would be its weight on preferred stock? Ip Is is the symbol that represents the before-tax cost of debt in the weighted average cost of capital (WACC) equation. rd 0.13 0.64 0.16 0.14arrow_forward
- The calculation of WACC involves calculating the weighted average of the required rates of return on debt, preferred stock, and common equity, where the weights equal the percentage of each type of financing in the firm's overall capital structure. re Is Id Ip is the symbol that represents the cost of raising capital through retained earnings in the weighted average cost of capital (WACC) equation. Co. has $2.7 million of debt, $3 million of preferred stock, and $1.2 million of common equity. What would be its weight on debt? 0.34 0.17 0.47 O 0.39arrow_forwardThe calculation of WACC involves calculating the weighted average of the required rates of return on debt, preferred stock, and common equity, where the weights equal the percentage of each type of financing in the firm's overall capital structure. is the symbol that represents the cost of raising capital through retained earnings in the weighted average cost of capital (WACC) equation. Raymond Co. has $1.1 million of debt, $1.5 million of preferred stock, and $1.2 million of common equity. What would be its weight on preferred stock? O 0.31 O 0.43 O 0.32 O 0.39arrow_forwardThe calculation of WACC involves calculating the weighted average of the required rates of return on debt, preferred stock, and common equity, where the weights equal the percentage of each type of financing in the firm’s overall capital structure. (rs, rd, rp, re) is the symbol that represents the cost of raising capital by issuing new stock in the weighted average cost of capital (WACC) equation. Avery Co. has $2.7 million of debt, $1.5 million of preferred stock, and $2.2 million of common equity. What would be its weight on preferred stock? 0.23 0.21 0.42 0.18arrow_forward
- The calculation of WACC involves calculating the weighted average of the required rates of return on debt, preferred stock, and common equity, where the weights equal the percentage of each type of financing in the firm's overall capital structure. is the symbol that represents the cost of raising capital through retained earnings in the weighted average cost of capital (WACC) equation. Bryant Co. has $2.7 million of debt, $1 million of preferred stock, and $1.2 million of common equity. What would be its weight on debt? O 0.55 0.18 O 0.22 0.20arrow_forwardThe calculation of WACC involves calculating the weighted average of the required rates of return on debt, preferred stock, and common equity, where the weights equal the percentage of each type of financing in the firm’s overall capital structure. is the symbol that represents the before-tax cost of debt in the weighted average cost of capital (WACC) equation. Wyle Co. has $1.4 million of debt, $2.5 million of preferred stock, and $3.3 million of common equity. What would be its weight on debt? 0.28 0.32 0.19 0.46arrow_forwardThe calculation of WACC involves calculating the weighted average of the required rates of return on debt, preferred stock, and common equity, where the weights equal the percentage of each type of financing in the firm' s overall capital structure. is the symbol that represents the before-tax cost of debt in the weighted average cost of capital (WACC) equation. Mitchell Co. has $1.1 million of debt, $2 million of preferred stock, and $3.3 million of common equity. What would be its weight on preferred stock? 0.28 0.25 0.17 0.31arrow_forward
- The calculation of WACC involves calculating the weighted average of the required rates of return on debt, preferred stock, and common equity, where the weights equal the percentage of each type of financing in the firm’s overall capital structure. Q1. ________is the symbol that represents the cost of preferred stock in the weighted average cost of capital (WACC) equation. Q2. Avery Co. has $3.9 million of debt, $2 million of preferred stock, and $2.2 million of common equity. What would be its weight on debt? a. 0.27 b. 0.25 c. 0.48 d. 0.20 Q1. Option 1 rS or Option 2 rD or Option 3 rP or Option 4 rE Please provide the correct answers. Thank you!arrow_forwardThe company’s capital structure is as follows: Debt Weight 25%, Preferred Stock Weight 25%, Common equity Weight 50%. The cost of debt is 12%, the cost of preferred stock is 15% and the cost of common equity is 0.208. Calculate the company’s weighted average cost of capital. Select one: a. 0.1415 b. 0.0740 c. 0.1715 d. 0.1340 e. All the given choices are not correctarrow_forwardHello. I need help with the following question please. Taylor Company has a target capital structure that consists of $3.3 million of debt capital, $2.5 million of preferred stock financing, and $2.8 million of common equity. The corresponding weights of its debt, preferred stock, and common equity financing that should be used to compute its weighted cost of capital (rounded to the nearest wo decimal places) are: 38.37%, 29.07%, and 32.56%, respectively 32.04%, 34.53%, and 33.43%, respectively 29.07%, 32.56%, and 38.37%, respectively 34.53%, 33.43%, and 32.04%, respectively Consider the following case: Mason Limited, a key competitor of Taylor Company in the construction field, has a capital structure consisting of 45% debt, 5% preferred stock, and 50% common equity. Concerned that its cost of capital may put it at a competitive disadvantage vis-a-vis the Taylor Company, a Mason analyst has been tasked with computing and comparing the weighted costs…arrow_forward
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