A fim has the market price of Rs. 38. A constant expected annual growth rate of 6% and a dividend of Rs. 2.50 per share has been paid at the beginning of the current year. Calculate the weighted average cost of capital, if it has the following capital structure and after-tax costs for the different sources of funds used: Sources of Funds Amount After-tax cost Rs. Debt 20,00,000 6.5 Preference Shares 25,00,000 10 Equity Shares Retained Earnings 25,00,000 30,00,000 To be calculated 14 Total 100,00,000
Q: What is the current value per share?
A: The current value per share means the price of share prevailing in the market. The discount rate is…
Q: (Individual or component costs of capital) Compute the cost of capital for the firm for the…
A: Par Value = 1000 Semi Annual Interest Payment = 56.50 Current Value = 1126 N = 20 semi annual…
Q: Compute the weighted average cost of capital given the information below. Book Value of Debt…
A: in this we have to calculate cost of equity and cost of debt and weight of each and than calculate…
Q: A firm has determined its optimal capital structure, which is composed of the following sources and…
A: Here, Interest Rate in debt is 10% Par Value of Preferred Stock is $100 Market Value of Preferred…
Q: . (Computing individual or component costs of capital) Compute the cost of capital foreach of the…
A: The actual cost of issuing funds is known as the cost of capital. The cost of capital can be…
Q: Express Industry’s expected net income for next year is $1.6 million. Its target, and current,…
A: Under the residual dividend policy, the dividends are paid to shareholders after the profits for the…
Q: Sainsbury is financed by both debt and equity. Using the following information and calculate the…
A: WACC means weighted average cost of finance or to raise the funds. Company has to pay an additional…
Q: (Individual or component costs of capital) Compute the cost of capital for the firm for the…
A: Part A to D:Calculation of After-tax Cost of Debt, Cost of Common Stock, Cost of Preferred Stock: a.…
Q: Assume that IWT has completed its IPO andhas a $112.5 million capital budget planned forthe coming…
A: Calculations are shown as:
Q: Compute the weighted-average cost of capital for a firm with the following sources of funds and…
A: Given:
Q: Determine the company’s WACC
A: WACC: WACC (weighted average cost of capital) is the cost of capital of the firm. It is composed of…
Q: Wentworth Industries is 100 percent equity financed. Its current beta is 1.0. The expected market…
A: Part 1: Current Beta = 1 Market rate of return = 13% Risk free rate = 9%
Q: DEF has a capital structure that consists of 70% equity and 30% debt. The company's bonds have a…
A: The weighted average cost of capital is the rate of average cost a firm has to bear in order to…
Q: Wanbay Corporation is interested in estimating its additional financing needed to support a growth…
A: Additional Financing Needed (AFN) is a techniques used by corporates to understand the amount of…
Q: The market value of Fords' equity, preferred stock, and debt are $6 billion, $2 billion, and $11…
A: Weighted Average Cost of Capital (WACC) is the rate at which the company is willing to pay to its…
Q: Company H is a high-growth company. The current price per share is RMB 20, the dividend per share…
A: A convertible bond is a fixed-income corporate financial investment that pays interest but can be…
Q: A firm has determined its optimal capital structure which is composed of the following sources.…
A: Price of preferred stock (P0) = RM 75 Preferred dividend (D) = RM 10 Cost of issuing and selling…
Q: Puckett Products is planning for $5 million in capital expenditures nextyear. Puckett’s target…
A: Computation of the payout ratio for the Puckett products is shown:
Q: Target Capital Structure of Moor Systems Inc is 60% common equity and 40% debt for long time. Now it…
A: The term capital structure refers to the structure of debt and equity financing in the company. A…
Q: What is the company’s weighted average cost of capital (WACC) if all the equity used is from…
A: Weighted Average Cost of Capital is the summation of Weighted average of equity and debt in…
Q: AFW Industries has 182 million shares outstanding and expects earnings at the end of this year of…
A: We need to use constant growth model to calculate stock price. The formula is Share Price(P0) =D1r-g…
Q: firm for the following: a. Currently, new bond issues with a credit rating and maturity similar to…
A: We need to compute cost of capital of each component.
Q: A construction company has asked its chief financial officer to measure the cost of each specific…
A: Every business firm requires capital and finance for its development, growth, and operations. Some…
Q: A firm has the market price of Rs. 38. A constant expected annual growth rate of 6% and a dividend…
A: Weighted Average Cost of Capital (WACC) is the overall cost of capital from all the sources of…
Q: Investors require a 10 percent per year return on the stock of the Rabiya’s Corporation, which…
A: The company is considering the operating activities for the purpose of earnings income. The income…
Q: A firm has determined its optimal capital structure, which is composed of the following sources and…
A: Given: Years = 3 Cost of machine = $6,000,000 Cash savings = $2,600,000
Q: A firm has determined its optimal capital structure, which is composed of the following sources and…
A: Capital structure of the company is the proportion of different types of financing being used. The…
Q: Alpha Corporation has average annual free cashflows to the equity holder and to the firm of…
A: Value of Equity is that money which was invested by the Equity share holder in the Company It will…
Q: Oranda Corp. has 1 million shares of stock outstanding. Oranda has a target capital structure with…
A: a) As per residual distribution policy dividend available for distribution = Net income - (Capital…
Q: American Inc. projects the following data for the coming year. If the firm follows the residual…
A: Given information EBIT = $2,000,000 Interest rate = 10% Outstanding Debt = $5,000,000 Outstanding…
Q: BC Corporation has a weighted average cost of capital of 16%. What is its value if it will provide…
A: Earnings here are the dividends to the investors. Dividend Discount Model (DDM) is used to value a…
Q: Sorensen Systems Inc. is expected to pay a $2.00 dividend at year end (D1 = $2.00), the dividend is…
A: wacc formula is given as: WACC =wd×kd×1-tax+we×kewhere,wd= weight of debtwe= weight of equitykd=cost…
Q: Mama Inc. utilizes the residual dividend model to determine its ordinary dividend payout. This year…
A: Introduction Under Residual dividend policy the amount of dividends paid to the shareholders amount…
Q: Altamonte Telecommunications has a target capital structure that consists of 50% debt and 50%…
A:
Q: The following was collected with regards to Blue Co.: · The capital structure is 60% equity…
A: Cost of debt: It refers to the rate of interest paid by a company on its fixed obligations (loans…
Q: You have been asked to value a firm with expected annual after-tax cash flows, before debt payments,…
A: Capital structure of the firm consists of both debt and equity. Cost of raising funds from each…
Q: A firm expects to have net income of $5,000,000 during the next year. The company’s target capital…
A: Profit used in funding capital= Capital budget * Ratio of equity in capital strucutre
Q: ABC CAPITAL is a hedge fund with $300 million of initial investment capital. They charge a 2 percent…
A: Hi There, thanks for posting the question. But as per Q&A guidelines, we must answer the first…
Q: If the company was calculating its weighted average cost of capital(WACC),the proportion of…
A: WACC: It represents the average cost of capital for the company or a firm. It is estimated by the…
Q: Determine the weighted average cost of capital for the firm
A: Cost of capital for a source of finance can be defined as the rate of return that a capital provider…
Q: Heavy Metal Corporation is expected to generate the following free cash flows over the next five…
A: FCF1 = $54.9 million FCF2 = $67.5 million FCF3 = $78.3 million FCF4 = $76.5 million FCF5 = $82.3…
Q: STARS Inc. forecasts a positive Free Cash Flow for the coming year, with FCF1 = $10,000,000, and it…
A: Calculations are as below-
Q: Kosm Inc. forecasts a positive Free Cash Flow for the coming year, with FCF1 = $10,000,000, and it…
A: Formulas:
Q: SIROM Scientific Solutions has $10 million of outstanding equity and $5 million of bank debt. The…
A: The below expression can be used to calculate cost of equity:
Q: Kahn Inc. has a target capital structure of 50% common equity and 50% debt to fund its $12 billion…
A: Price of share = Dividend1Cost of equity - growth rate Return on equity = net inocome equity×100
Q: Harlequin Capital is a hedge fund with $250 million of initial capital. Harlequin charges a 2%…
A: Hurdle income = Hurdle rate * AUM beginning of year Base for incentive fees = Net income after…
Step by step
Solved in 3 steps
- Ogier Incorporated currently has $800 million in sales, which are projected to grow by 10% in Year 1 and by 5% in Year 2. Its operating profitability ratio (OP) is 10%, and its capital requirement ratio (CR) is 80%? What are the projected sales in Years 1 and 2? What are the projected amounts of net operating profit after taxes (NOPAT) for Years 1 and 2? What are the projected amounts of total net operating capital (OpCap) for Years 1 and 2? What is the projected FCF for Year 2?Puckett Products is planning for $3 million in capital expenditures next year. Puckett's target capital structure consists of 60% debt and 40% equity. If net income next year is $2 million and Puckett follows a residual distribution policy with all distributions as dividends, what will be its dividend payout ratio? Round your answer to two decimal places.Poly is planning for P5 million in capital expenditures next year. Poly’s target capital structure consists of 60% debt and 40% equity. If net income next year is P3 million and Poly follows a residual distribution policy with all distributions as dividends, what will be its dividend payout ratio?
- 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.…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.…You have been assigned to calculate the weighted average cost of capital (WACC) of XYZ corporation. The target capital structure of XYZ is 45.00% debt and the remaining is common equity. XYZ's bonds have a yield of 8.00%. The corporation paid dividend of $0.61 and the future dividends are expected to grow at a constant rate of 6.00%. The current market price per share of common stock is $17.50. The flotation costs are 10.00% of price per share. The tax bracket is 40.00%. Calculate the WACC when the corporation is to finance its investments through a new stock issue.Your Answer:(Round to TWO decimals.)The WACC is: ..............................
- 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: 35% long-term debt, 20% preferred stock, and 45% common stock equity (retained earnings, new common stock, or both). The firm's tax rate is 21%. Debt The firm can sell for $1030 a 13-year, $1,000-par-value bond paying annual interest at a 7.00% coupon rate. A flotation cost of 2% of the par value is required. Preferred stock 8.5% (annual dividend) preferred stock having a par value of $100 can be sold for $90. An additional fee of $4 per share must be paid to the underwriters. Common stock The firm's common stock is currently selling for $60 per share. The stock has paid a dividend that has gradually increased for many years, rising from $2.75 ten years ago to the $5.41 dividend payment, D0, that the company just recently made. If the…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: 35% long-term debt, 20% preferred stock, and 45% common stock equity (retained earnings, new common stock, or both). The firm's tax rate is 21%. Debt The firm can sell for $1030 a 13-year, $1,000-par-value bond paying annual interest at a 7.00% coupon rate. A flotation cost of 2% of the par value is required. Preferred stock 8.5% (annual dividend) preferred stock having a par value of $100 can be sold for $90. An additional fee of $4 per share must be paid to the underwriters. Common stock The firm's common stock is currently selling for $60 per share. The stock has paid a dividend that has gradually increased for many years, rising from $2.75 ten years ago to the $5.41 dividend payment, D0, that the company just recently made. If the…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: 40% long-term debt, 15% preferred stock, and 45% common stock equity (retained earnings, new common stock, or both). The firm's tax rate is 26%. Debt The firm can sell for $1005 a 13-year, $1,000-par-value bond paying annual interest at a 6.00% coupon rate. A flotation cost of 2.5% of the par value is required. Preferred stock 7.00% (annual dividend) preferred stock having a par value of $100 can be sold for $98. An additional fee of $5 per share must be paid to the underwriters. Common stock The firm's common stock is currently selling for $80 per share. The stock has paid a dividend that has gradually increased for many years, rising from $2.50 ten years ago to the $4.92 dividend payment, D0, that the company just recently made. If…