company 10. Joy Corp. wants to calculate its weighted average cost of capital. The has no sufficient retained earnings to fund the equity portion of the capital budget. Additional information revealed the following: Dividend paid recently * Growth rate - 6% Flotation cost - 10% * Tax rate - 40% * Stock price P2.00 per share P 32.00 per share 9% * Bond YTM Target capital structure: 75% Equity; 25% Debt What is the company's WACC? .

company 10. Joy Corp. wants to calculate its weighted average cost of capital. The has no sufficient retained earnings to fund the equity portion of the capital budget. Additional information revealed the following: Dividend paid recently * Growth rate - 6% Flotation cost - 10% * Tax rate - 40% * Stock price P2.00 per share P 32.00 per share 9% * Bond YTM Target capital structure: 75% Equity; 25% Debt What is the company's WACC? .

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter12: Capital Structure

Section: Chapter Questions

Problem 9PROB

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Joy Corp. wants to calculate its weighted average cost of capital. The company has no sufficient retained earnings to fund the equity portion of the capital Additional information revealed the following: Dividend paid recently …….P2.00 per share * Growth rate - 6% Stock price …………… P 32.00 per share * Flotation cost - 10% Bond YTM ……………. 9% * Tax rate - 40% Target capital structure: 75% Equity; 25% Debt What is the company’s WACC?
A company has determined that its optimal; capital structure consists of 40%debt and 60% equity. Assume the firm will not have enough retained earnings to fund the equity portion of its capital budget. Also assume the firm accounts for flotation cost by adding the cost of capital. Given the following information, calculate the firm's WACC. Net Income - P40,000; Pay out ratio 60% Estimated bond yield - 8%; Shares outstanding - 10,000 shares Market Price = P25.00 ; Growth = 5% Flotation cost - 12% ; Tax rate - 40% show solution
Alpha Corporation has average annual free cashflows to the equity holder and to the firmof P3,000,000 and P3,350,000 respectively. Assuming that the weighted average cost ofcapital and actual return of on assets is 16.75% while the market return on Alpha's debt is7%, what is the value of its equity? a. P34,358,974.36 b.P15,000,000.00 c.P17,910,447.76 d.P20,000,000.00
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Yang Centers wants to report at least $1.75 in earnings per share. Given the following information, how much debt should be in its capital structure? (Answer only in integers without $ sign.) Book value per share: $8.75 Cost of debt: 10 % EBI: T $500,000 Tax bracket: 30 % Total Capital: $4,000,000 Answer:?????????
Given the following information, calculate the weighted average cost of capital for Digital Processing Inc. Percent of capital structure: Preferred stock 20% Common equity 40 Debt 40 Additional information: Corporate tax rate 25% Dividend, preferred $8.50 Dividend, expected common $2.50 Dividend, preferred $105.00 Growth rate 7% Bond yield 9.5 Flotation cost, preferred $3.60 Price, common $75.00 You are required to calculate: 1.Cost of debt (after tax) ? 2 .Cost of preferred stock ? 3.Cost of common equity ? 4.WACC ?
Delta Corporation has the following capital structure: Cost (aftertax)WeightsWeighted CostDebt (Kd)5.5%25%1.38%Preferred stock (Kp)10.5252.63Common equity (Ke) (retained earnings)10.5505.25Weighted average cost of capital (Ka) 9.25% If the firm has $26 million in retained earnings, at what size capital structure will the firm run out of retained earnings? Note: Enter your answer in millions of dollars (e.g., $10 million should be entered as "10". Note: Enter your answer in millions of dollars (e.g., $10 million should be entered as "10".The 5.5 percent cost of debt referred to earlier applies only to the first $18 million of debt. After that the cost of debt will go up. At what size capital structure will there be a change in the cost of debt?
Consider the following information for Federated Junkyards of America. Debt: $65,000,000 book value outstanding. The debt is trading at 86% of book value. The yield to maturity is 9%. Equity: 1,500,000 shares selling at $32 per share. Assume the expected rate of return on Federated’s stock is 18%. Taxes: Federated’s marginal tax rate is Tc = 0.21. Calculate the weighted-average cost of capital (WACC).
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The company’s capital structure is as follows: Debt Weight 25%, Preferred Stock Weight 25%, Common equity Weight 50%. The cost of debt is 12%, the cost of preferred stock is 15% and the cost of common equity is 0.218. Calculate the company’s weighted average cost of capital. اخترأحد الخيارات a. 0.1390 b. All the given choices are not correct c. 0.1465 d. 0.0790 e. 0.1765
ABC Co.’s target capital structure is 55% equity and 45% debt. The company has sufficient retained earnings to fund the equity portion of its capital budget. The before-tax cost of debt is 9%, and the company is subject to 30% income tax. The expected dividend next period is P5 and the current stock price is P45. What should be the firm’s growth rate in order to attain a weighted average cost of capital of 11.5%?a. 2.68%b. 3.44%c. 4.64%d. 6.75%e. answer not given
Consider the following information for Federated Junkyards of America. Debt: $76,000,000 book value outstanding. The debt is trading at 91% of book value. The yield to maturity is 10%. Equity: 2,600,000 shares selling at $43 per share. Assume the expected rate of return on Federated’s stock is 19%. Taxes: Federated’s marginal tax rate is Tc = 0.21. Calculate the weighted-average cost of capital (WACC). (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)