Barton Industries expects that its target capital structure for raising funds in the future for its capital budget will consist of 40% debt, 5% preferred stock, and 55% common equity. Note that the firm's marginal tax rate is 25%. Assume that the firm's cost of debt, rd, is 10.4%, the firm's cost of preferred stock, rp, is 9.6% and the firm's cost of equity is 13.0% for old equity, rs, and 13.3% for new equity, re. What is the firm's weighted average cost of capital (WACC1) if it uses retained earnings as its source of common equity? Do not round intermediate calculations. Round your answer to two decimal places.
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Barton Industries expects that its target capital structure for raising funds in the future for its capital budget will consist of 40% debt, 5%
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- Barton Industries expects that its target capital structure for raising funds in the future for its capital budget will consist of 40% debt, 5% preferred stock, and 55% common equity. Note that the firm's marginal tax rate is 25%. Assume that the firm's cost of debt, rd, is 10.7%, the firm's cost of preferred stock, rp, is 9.9% and the firm's cost of equity is 13.3% for old equity, rs, and 13.9% for new equity, re. What is the firm's weighted average cost of capital (WACC1) if it uses retained earnings as its source of common equity? Do not round intermediate calculations. Round your answer to two decimal places. % What is the firm’s weighted average cost of capital (WACC2) if it has to issue new common stock? Do not round intermediate calculations. Round your answer to two decimal places.Barton Industries expects that its target capital structure for raising funds in the future for its capital budget will consist of 40% debt, 5% preferred stock, and 55% common equity. Note that the firm's marginal tax rate is 25%. Assume that the firm's cost of debt, rd, is 6.8%, the firm's cost of preferred stock, rps, is 6.3% and the firm's cost of equity is 10.8% for old equity, rs, and 11.1% for new equity, re. What is the firm's weighted average cost of capital (WACC1) if it uses retained earnings as its source of common equity? Do not round intermediate calculations. Round your answer to three decimal places. % What is the firm’s weighted average cost of capital (WACC2) if it has to issue new common stock? Do not round intermediate calculations. Round your answer to three decimal places. %1. Quantitative Problem: Barton Industries expects that its target capital structure for raising funds in the future for its capital budget will consist of 40% debt, 5% preferred stock, and 55% common equity. Note that the firm's marginal tax rate is 25%. Assume that the firm's cost of debt, rd, is 9.2%, the firm's cost of preferred stock, rp, is 8.4% and the firm's cost of equity is 11.8% for old equity, rs, and 12.2% for new equity, re. What is the firm's weighted average cost of capital (WACC1) if it uses retained earnings as its source of common equity? Do not round intermediate calculations. Round your answer to two decimal places. 2. What is the firm’s weighted average cost of capital (WACC2) if it has to issue new common stock? Do not round intermediate calculations. Round your answer to two decimal places
- A company is estimating its optimal capital structure. Now the company has a capital structure that consists of 20% debt and 80% equity, based on market values (debt to equity D/S ratio is 0.25). The risk-free rate (rRF) is 5% and the market risk premium (rM – rRF) is 6%. Currently the company’s cost of equity, which is based on the CAPM, is 14% and its tax rate is 20%. Find the firm’s current leveraged beta using the CAPM 1.0 1.5 1.6 1.7Hardware Co. is estimating its optimal capital structure. Hardware Co. has a capital structure that consists of 80% equity and 20% debt and a corporate tax rate of 40%. Based on the short-term treasury bill rates the risk-free rate is 6% and the market return is 11%. Hardware Co. computed its cost of equity based on the CAPM – 12%. The company will shift its capital structure to 50% debt and 50% equity funded. 1. What is the levered beta on the capital structure of 50% debt and 50% equity funded?Quantitative Problem: Barton Industries expects that its target capital structure for raising funds in the future for its capital budget will consist of 40% debt, 5% preferred stock, and 55% common equity. Note that the firm's marginal tax rate is 40%. Assume that the firm's cost of debt, rd, is 7.1%, the firm's cost of preferred stock, rps, is 6.6% and the firm's cost of equity is 11.1% for old equity, rs, and 12% for new equity, re. What is the firm's weighted average cost of capital (WACC1) if it uses retained earnings as its source of common equity? Round your answer to 3 decimal places. Do not round intermediate calculations. % What is the firm’s weighted average cost of capital (WACC2) if it has to issue new common stock? Round your answer to 3 decimal places. Do not round intermediate calculations. %
- Hardware Co. is estimating its optimal capital structure. Hardware Co. has a capital structure that consists of 80% equity and 20% debt and a corporate tax rate of 40%. Based on the short-term treasury bill rates the risk-free rate is 6% and the market return is 11%. Hardware Co. computed its cost of equity based on the CAPM – 12%. The company will shift its capital structure to 50% debt and 50% equity funded.1. What is the current beta of Hardware Co.’s equity? 2. What is the unlevered beta of Hardware Co.? 3. What is the levered beta on the capital structure of 50% debt and 50% equity funded? 4. What would be Hardware Co.’s estimated cost of equity if it will shift its capital structure to 50% debt and 50% equity funded?Quantitative Problem: Barton Industries expects that its target capital structure for raising funds in the future for its capital budget will consist of 40% debt, 5% preferred stock, and 55% common equity. Note that the firm's marginal tax rate is 25%. Assume that the firm's cost of debt, rd, is 10.5%, the firm's cost of preferred stock, rp, is 9.7% and the firm's cost of equity is 13.1% for old equity, rs, and 13.6% for new equity, rę. What is the firm's weighted average cost of capital (WACC1) if it uses retained earnings as its source of common equity? Do not round intermediate calculations. Round your answer to two decimal places. What is the firm's weighted average cost of capital (WACC2) if it has to issue new common stock? Do not round intermediate calculations. Round your answer to two decimal places. %Hardware Co. is estimating its optimal capital structure. Hardware Co. has a capital structure that consists of 80% equity and 20% debt and a corporate tax rate of 40%. Based on the short-term treasury bill rates the risk-free rate is 6% and the market return is 11%. Hardware Co. computed its cost of equity based on the CAPM – 12%. The company will shift its capital structure to 50% debt and 50% equity funded.What would be Hardware Co.’s estimated cost of equity if it will shift its capital structure to 50% debt and 50% equity funded?
- K. Bell Jewelers wishes to explore the effect on its cost of capital of the rate at which the company pays taxes. The firm wishes to maintain a capital structure of 30% debt, 20% preferred stock, and 50% common stock. The cost of financing with retained earnings is 13%, the cost of preferred stock financing is 8%, and the before-tax cost of debt financing is 6%. Calculate the weighted average cost of capital (WACC) given a tax rate ofDillon Labs has asked its financial manager to measure the cost of each specific type of capital as well as the weighted average cost of capital. The weighted average cost is to be measured by using the following weights: 30% long-term debt, 10% preferred stock, and 60% common stock equity (retained earnings, new common�� stock, or both). The firm's tax rate is 23%. Debt : The firm can sell for $1030 a 14-year, $1,000-par-value bond paying annual interest at a 8.00% coupon rate. A flotation cost of 2% of the par value is required. Preferred stock: 9.00% (annual dividend) preferred stock having a par value of $100 can be sold for $92.An additional fee of $2 per share must be paid to the underwriters. Common stock: The firm's common stock is currently selling for $90 per share. The stock has paid a dividend that has gradually increased for many years, rising from $2.00 ten years ago to the $3.26 dividend payment, D0, that the company just recently made.…Dillon Labs has asked its financial manager to measure the cost of each specific type of capital as well as the weighted average cost of capital. The weighted average cost is to be measured by using the following weights: 30% long-term debt, 10% preferred stock, and 60% common stock equity (retained earnings, new common stock, or both). The firm's tax rate is 23%. Debt : The firm can sell for $1030 a 14-year, $1,000-par-value bond paying annual interest at a 8.00% coupon rate. A flotation cost of 2% of the par value is required. Preferred stock: 9.00% (annual dividend) preferred stock having a par value of $100 can be sold for $92.An additional fee of $2 per share must be paid to the underwriters. Common stock: The firm's common stock is currently selling for $90 per share. The stock has paid a dividend that has gradually increased for many years, rising from $2.00 ten years ago to the $3.26 dividend payment, D0, that the company just recently made.…