BHP Billiton, an Australian company, just paid $0.85 as a dividend, which is expected to grow at 6.0 per cent. Its most recent stock price is $82. Further, the company has a debt issue outstanding with 23 years to maturity that is quoted at 95 per cent of face value. The issue makes semiannual payments and has an embedded cost of 6 per cent annually. It considers a debt-equity ratio of 0.60 and a 25 per cent corporate tax rate. In this year, the company has an EBIT of $3.15 million. Depreciation, the increase in net working capital, and capital spending were $265,000, $105,000, and $495,000, respectively. Therefore, you expect that over the next five years, EBIT will grow at 15 per cent per year, depreciation and capital spending will grow at 15 per cent per year, and NWC will grow at 10 per cent per year. It also has $19.5 million in debt and 400,000 shares outstanding. After Year-5, the adjusted cash flow from assets is expected to grow at 3.50 per cent indefinitely. Answer the following five (5) questions based on the above information and enter only the number as an answer, for example, 1234.56. What is the cost of equity (%)? Answer What is the post-tax cost of debt (%)? Answer What is the WACC (%)? Answer What is the value of the company ($)? Answer What is the price per share ($)? Answer
BHP Billiton, an Australian company, just paid $0.85 as a dividend, which is expected to grow at 6.0 per cent. Its most recent stock price is $82. Further, the company has a debt issue outstanding with 23 years to maturity that is quoted at 95 per cent of face value. The issue makes semiannual payments and has an embedded cost of 6 per cent annually. It considers a debt-equity ratio of 0.60 and a 25 per cent corporate tax rate. In this year, the company has an EBIT of $3.15 million. Depreciation, the increase in net working capital, and capital spending were $265,000, $105,000, and $495,000, respectively. Therefore, you expect that over the next five years, EBIT will grow at 15 per cent per year, depreciation and capital spending will grow at 15 per cent per year, and NWC will grow at 10 per cent per year. It also has $19.5 million in debt and 400,000 shares outstanding. After Year-5, the adjusted cash flow from assets is expected to grow at 3.50 per cent indefinitely. Answer the following five (5) questions based on the above information and enter only the number as an answer, for example, 1234.56. What is the cost of equity (%)? Answer What is the post-tax cost of debt (%)? Answer What is the WACC (%)? Answer What is the value of the company ($)? Answer What is the price per share ($)? Answer
Chapter3: Evaluation Of Financial Performance
Section: Chapter Questions
Problem 17P
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Question
BHP Billiton, an Australian company, just paid $0.85 as a dividend, which is expected to grow at 6.0 per cent. Its most recent stock price is $82. Further, the company has a debt issue outstanding with 23 years to maturity that is quoted at 95 per cent of face value. The issue makes semiannual payments and has an embedded cost of 6 per cent annually. It considers a debt-equity ratio of 0.60 and a 25 per cent corporate tax rate. In this year, the company has an EBIT of $3.15 million. Depreciation , the increase in net working capital, and capital spending were $265,000, $105,000, and $495,000, respectively. Therefore, you expect that over the next five years, EBIT will grow at 15 per cent per year, depreciation and capital spending will grow at 15 per cent per year, and NWC will grow at 10 per cent per year. It also has $19.5 million in debt and 400,000 shares outstanding. After Year-5, the adjusted cash flow from assets is expected to grow at 3.50 per cent indefinitely.
Answer the following five (5) questions based on the above information and enter only the number as an answer, for example, 1234.56.
What is the cost of equity (%)?
Answer
What is the post-tax cost of debt (%)?
Answer
What is the WACC (%)?
Answer
What is the value of the company ($)?
Answer
What is the price per share ($)?
Answer
Transcribed Image Text:What is the cost of equity (%)?
What is the cost of debt (%)?
What is the WACC (%)?
What is the value of the company value ($)?
What is the price per share ($)?
Transcribed Image Text:BHP Billiton, an Australian company, just paid $0.85 as a dividend, which is expected to grow at 6.0 per cent. Its most
recent stock price is $82. Further, the company has a debt issue outstanding with 23 years to maturity that is quoted at 95
per cent of face value. The issue makes semiannual payments and has an embedded cost of 6 per cent annually. It
considers a debt-equity ratio of 0.60 and a 25 per cent corporate tax rate. In this year, the company has an EBIT of $3.15
million. Depreciation, the increase in net working capital, and capital spending were $265,000, $105,000, and $495,000,
respectively. Therefore, you expect that over the next five years, EBIT will grow at 15 per cent per year, depreciation and
capital spending will grow at 15 per cent per year, and NWC will grow at 10 per cent per year. It also has $19.5 million in
debt and 400,000 shares outstanding. After Year-5, the adjusted cash flow from assets is expected to grow at 3.50 per
cent indefinitely.
Answer the following five (5) questions based on the above information and enter only the number as an answer, for
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