Crow Academy leadership wants to know its WACC given its current capital structure. The capital structure data is as follows. Equity: 2,843,200 shares outstanding, price $18.59, stock beta 0.96. Preferred stock: 675,000 shares outstanding, price $21.74, fixed dividend $0.75. Debt: 242,000 zero annual coupon bonds issued, price is 38% of par, 15 years to maturity. If the current market return is 14.28%, the risk-free rate is 3.18%, and the tax rate is 21%, what is the company's weighted average cost of capital (WACC)?

Crow Academy leadership wants to know its WACC given its current capital structure. The capital structure data is as follows. Equity: 2,843,200 shares outstanding, price $18.59, stock beta 0.96. Preferred stock: 675,000 shares outstanding, price $21.74, fixed dividend $0.75. Debt: 242,000 zero annual coupon bonds issued, price is 38% of par, 15 years to maturity. If the current market return is 14.28%, the risk-free rate is 3.18%, and the tax rate is 21%, what is the company'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

See similar textbooks

Similar questions

Use the following information to compute the weighted average cost of capital (WACC) of GoGo Inc. ▪ Debt information: The beta of GoGo Inc. stock is 1.5 . Risk-free rate is 4% • Market return is 15% • GoGo's capital structure is 65% equity and 35% debt. The tax rate is 21%. 14.62% Bonds will mature in 9 years. The maturity value is $1,000. GoGo's WACC is.. 15.47% The coupon rate is 8%, with semiannual payments. The current bond price is $1,015. 12.20% 13.32%
Consider Higgins Production which has the following information about its capital structures:Debt - 1,500, 5 percent coupon bonds outstanding, $1,000 par value, 7 years to maturity, selling for80 percent of par, the bonds make semi-annual payments Common Stock - 100,000 shares outstanding, selling for $45 per share; the beta is 0.80 Preferred Stock - 25,000 shares of 6 percent preferred stock outstanding, currently sellingfor $150 per share Market Information - 6 percent market risk premium and 4 percent risk-free rate.Required: Calculate the following if the company has a tax rate of 36 percent. Total Market Value for the Firm After-tax cost of Debt Cost of Equity Cost of Preferred Stock Weighted Average Cost of Capital
A company's capital structure consists of: 1.100,000 bonds,each with a face value of $100 paying a wemi-annual coupon of 6% p.a.,and with 5 years to maturity.These bonds are currently trading at a market yield of 5% p.a. 2.1,000,000 ordinary shares currently trading at $20 each. If the company was calculating its weighted average cost of capital(WACC),the proportion of financing provided by bonds is:
Consider Higgins Production which has the following information about its capital structures:Debt - 1,500, 5 percent coupon bonds outstanding, $1,000 par value, 7 years to maturity, selling for80 percent of par, the bonds make semi-annual payments Common Stock - 100,000 shares outstanding, selling for $45 per share; the beta is 0.80 Preferred Stock - 25,000 shares of 6 percent preferred stock outstanding, currently sellingfor $150 per share Market Information - 6 percent market risk premium and 4 percent risk-free rate.Required: Calculate the following if the company has a tax rate of 36 percent.Cost of Equity Weighted Average Cost of Capital
Consider Higgins Production which has the following information about its capital structures:Debt - 1,500, 5 percent coupon bonds outstanding, $1,000 par value, 7 years to maturity, selling for80 percent of par, the bonds make semi-annual payments Common Stock - 100,000 shares outstanding, selling for $45 per share; the beta is 0.80 Preferred Stock - 25,000 shares of 6 percent preferred stock outstanding, currently sellingfor $150 per share Market Information - 6 percent market risk premium and 4 percent risk-free rate. i. Cost of Preferred Stockii. Weighted Average Cost of Capital
consider huggins product has the following information about its capital structures: Debt - 1,500, 5 percent coupon bonds outstanding, $1,000 par value, 7 years to maturity, selling for 80 percent of par, the bonds make semi-annual payments Common Stock - 100,000 shares outstanding, selling for $45 per share; the beta is 0.80 Preferred Stock - 25,000 shares of 6 percent preferred stock outstanding, currently selling for $150 per share Market Information - 6 percent market risk premium and 4 percent risk-free rate. Calculate the following if the company has a tax rate of 36 percent: Total Market Value for the Firm , After-tax cost of Debt, Cost of Equity , Cost of Preferred Stock, Weighted Average Cost of Capital. showing both percentages and dollar value for After-tax cost of Debt, Cost of Equity and Cost of Preferred Stock should all be calculated in dollar value and NOT percentages.
A firm has determined its optimal capital structure which is composed of the following sources and target market value proportions. Source of Capital Target Market ProportionsLong Term Debt 25%Preferred Stock 15%Common Stock 60%Total Firm Value 100% Debt: The firm can sell a 10-year, RM1,000 par value, 6% bond for RM945.Preferred Stock: The firm has determined it can issue preferred stock at RM70 per share par value. The stock will pay a RM8 annual dividend.Common Stock: A firm's common stock is currently selling for RM19 per share.The dividend expected to be paid at the end of the coming year is RM1.85. Its dividend payments have been growing at a constant rate for the last four years. Four years ago, the dividend was RM1.50. Additionally, the firm's marginal tax rate is 35%.Determine the weighted average cost of capital for the firm.
ABC Inc. has a the capital structure shown below. Liabilities Stockholders' Equity $122,099,000 $95,228,000 ABC Inc. will raise additional capital for new projects this year, in the amount of $44,978,000. The firm believes, however, that a capital structure with 56.25% debt is ideal. The firm will be able to issue new discount bonds at a price of $909 with a yield-to-maturity of 3%. Assuming they want to change their capital structure to the new target, how many new bonds will the firm need to issue? unur answer to the nearest bond.
The following information is available for the capital structure of Nice Fashion Group: Debt financing: a corporate bond issue that pays 10.5% annual coupon rate with an annual before-tax yield to maturity of 11%. The bond issue has face value of $1,000 and will mature in 20 years. Equity financing: an ordinary share issue of which the company management plans to pay a $5.50 dividend per share in the next financial year. The firm is maintaining 5% annual growth rate in dividends, which is expected to continue indefinitely. Required: A. Calculate the current price of the corporate bond for the Nice Fashion Group? B.Calculate the current value of the ordinary share of the Nice Fashion Group if the average return of the shares in the same industry is 13.5%? C. Calculate the current market value (rounded off to the nearest whole number) and capital structure of the Nice Fashion Group if there are 3,000 bonds and 25,000 shares available on market now (rounded off to two decimal places).…
Consider Huggins Production which has the following information about its capital structures: Debt - 1,500, 5 percent coupon bonds outstanding, $1,000 par value, 7 years to maturity, selling for 80 percent of par, the bonds make semi-annual payments Common Stock - 100,000 shares outstanding, selling for $45 per share; the beta is 0.80 Preferred Stock - 25,000 shares of 6 percent preferred stock outstanding, currently selling for $150 per share Market Information - 6 percent market risk premium and 4 percent risk-free rate. Required: Calculate the following if the company has a tax rate of 36 percent. 1. Total Market Value for the Firm 2. After-tax cost of Debt 3. Cost of Equity
Consider Huggins Production which has the following information about its capital structures: Debt - 1,500, 5 percent coupon bonds outstanding, $1,000 par value, 7 years to maturity, selling for 80 percent of par, the bonds make semi-annual payments Common Stock - 100,000 shares outstanding, selling for $45 per share; the beta is 0.80 Preferred Stock - 25,000 shares of 6 percent preferred stock outstanding, currently selling for $150 per share Market Information - 6 percent market risk premium and 4 percent risk-free rate. Required: Calculate the following if the company has a tax rate of 36 percent. 1. Cost of Preferred Stock 2. Weighted Average Cost of Capital
As the CFO of your company, you want to determine the rate your company must require for capital investment projects. You have gathered the following information about the various funding sources and market conditions. Debt: 23,000 bonds. 7.2 annual% coupon, with semiannual payments. $1,000 face value. 19 years to maturity. Priced at $1,060 per bond. Preferred stock: 25,000 shares preferred stock. Priced at $95 per share. $5.00 dividend per share. Common Stock: 560,000 shares. Priced at $74 per share. Beta is 1.17. Market: 7% market risk premium. 5.1% risk-free rate. Company’s tax rate is 23%. What is the company's Weighted Average Cost of Capital? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 12.34.

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS