5. Given an optimal capital structure that is 50% debt and 50% common stock, calculate the weighted average cost of capital for Stone Corp given the following additional information: Bond coupon rate. Bond yield to maturity. Dividend, expected Price, common Growth rate Corporate tax rate............ A. less than 9.5%. B. more than 9.5% and less than 10.25%. C. more than 10.25% and less than 11%. D. more than 11%. 14% 10% $5 $100 8% 30%

5. Given an optimal capital structure that is 50% debt and 50% common stock, calculate the weighted average cost of capital for Stone Corp given the following additional information: Bond coupon rate. Bond yield to maturity. Dividend, expected Price, common Growth rate Corporate tax rate............ A. less than 9.5%. B. more than 9.5% and less than 10.25%. C. more than 10.25% and less than 11%. D. more than 11%. 14% 10% $5 $100 8% 30%

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter17: Multinational Capital Structure And Cost Of Capital

Section: Chapter Questions

Problem 14QA

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A company had WACC (weighted average cost of capital) equal to 8. % If the company pays off mortgage bonds with an interest rate of 4% and issues an equal amount of new stock considered to be relatively risky by the market, which of the following is true? a. residual income will increase. b. ROI will decrease. c. WACC will increase. d. WACC will decrease.
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Use the information below to calculate Weighted Average Cost of Capital, assuming that no new shares will need to be sold and a capital structure that is 50% debt and 50% equity. coupon rate on bonds 13.00% corporate tax rate 25.00% anticipated dividend $5.00 yield to maturity on bonds 11.00% current share price $100.00 floatation costs 5.00% expected growth rate 7.00% a. 10.13% b. 10.26% c. 12.13% d. 11.88%
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