Debt: 65,000 bonds outstanding ($1,000 face or par value) with an 7% coupon, 15 years to maturity, selling for 106 percent of par; the bonds make semiannual payments. Common Stock: 700,000 shares outstanding, selling for $65 per share; the beta is 1.2. Preferred Stock: 80,000 shares outstanding ($100 par value), it pays a 10% dividend on par, and it is selling for $125 per share. Market: The expected return on the market portfolio is 10% , the risk-free rate is 2% and the tax rate is 26%. 24. What is the before-tax required rate of return on debt?

Debt: 65,000 bonds outstanding ($1,000 face or par value) with an 7% coupon, 15 years to maturity, selling for 106 percent of par; the bonds make semiannual payments. Common Stock: 700,000 shares outstanding, selling for $65 per share; the beta is 1.2. Preferred Stock: 80,000 shares outstanding ($100 par value), it pays a 10% dividend on par, and it is selling for $125 per share. Market: The expected return on the market portfolio is 10% , the risk-free rate is 2% and the tax rate is 26%. 24. What is the before-tax required rate of return on debt?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter20: Financing With Derivatives

Section: Chapter Questions

Problem 14P

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Debt: 65,000 bonds outstanding ($1,000 face or par value) with an 7% coupon, 15 years to maturity, selling for 106 percent of par; the bonds make semiannual payments. Common Stock: 700,000 shares outstanding, selling for $65 per share; the beta is 1.2. Preferred Stock: 80,000 shares outstanding ($100 par value), it pays a 10% dividend on par, and it is selling for $125 per share. Market: The expected return on the market portfolio is 10% , the risk-free rate is 2% and the tax rate is 26%. What is the firm’s WACC?
Debt: 65,000 bonds outstanding ($1,000 face or par value) with an 7% coupon, 15 years to maturity, selling for 106 percent of par; the bonds make semiannual payments. Common Stock: 700,000 shares outstanding, selling for $65 per share; the beta is 1.2. Preferred Stock: 80,000 shares outstanding ($100 par value), it pays a 10% dividend on par, and it is selling for $125 per share. Market: The expected return on the market portfolio is 10% , the risk-free rate is 2% and the tax rate is 26%. What is the required rate of return on common stock?
Suppose Westerfield Co. has the following financial information: Debt: 900, 000 bonds outstanding with a face value of $1,000. The bonds currently trade at 85% of par and have 12 years to maturity. The coupon rate equals 7%, and the bonds make semiannual interest payments. Preferred stock: 600,000 shares of preferred stock outstanding; currently trading for $108 per share, paying a dividend of $9 annually. Common stock: 25,000,000 shares of common stock outstanding; currently trading for $185 per share. Beta equals 1.22. Market and firm information: The expected return on the market is 9%, the risk - free rate is 5%, and the tax rate is 21 %. Calculate the weight of debt in the capital structure. (Enter percentages as decimals and round to 4 decimals)
Debt: 65,000 bonds outstanding ($1,000 face or par value) with an 7% coupon, 15 years to maturity, selling for 106 percent of par; the bonds make semiannual payments. Common Stock: 700,000 shares outstanding, selling for $65 per share; the beta is 1.2. Preferred Stock: 80,000 shares outstanding ($100 par value), it pays a 10% dividend on par, and it is selling for $125 per share. Market: The expected return on the market portfolio is 10% , the risk-free rate is 2% and the tax rate is 26%. What is the firm’s capital structure (Wd, Wps, We)?
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WhaDebt: 65,000 bonds outstanding ($1,000 face or par value) with an 7% coupon, 15 years to maturity, selling for 106 percent of par; the bonds make semiannual payments. Common Stock: 700,000 shares outstanding, selling for $65 per share; the beta is 1.2. Preferred Stock: 80,000 shares outstanding ($100 par value), it pays a 10% dividend on par, and it is selling for $125 per share. Market: The expected return on the market portfolio is 10% , the risk-free rate is 2% and the tax rate is 26%. What is the required rate of return on preferred stock?
You are given the following information on Parrothead Enterprises: Debt: 9,500 7 percent coupon bonds outstanding, with 25 years to maturity and a quoted price of 105.25. These bonds pay interest semiannually and have a par value of $1,000. Common stock: 250,000 shares of common stock selling for $65.00 per share. The stock has a beta of .95 and will pay a dividend of $3.20 next year. The dividend is expected to grow by 5 percent per year indefinitely. Preferred stock: 8,500 shares of 4.5 percent preferred stock selling at $94.50 per share. The par value is $100 per share. Market: , 11.5 percent expected return, risk - free rate of 3.85 percent, and a 25 percent tax rate. Calculate the company's WACC. Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g ., 32.16. WACC % You are given the following information on Parrothead Enterprises: Debt: Common stock: 9,500 7 percent coupon bonds outstanding, with 25 years to maturity and…
You are given the following information on Parrothead Enterprises: Debt: 9,200 7.3 percent coupon bonds outstanding, with 22 years to maturity and a quoted price of 108.5. These bonds pay interest semiannually and have a par value of $2,000. Common stock: 315,000 shares of common stock selling for $66.30 per share. The stock has a beta of 1.08 and will pay a dividend of $4.50 next year. The dividend is expected to grow by 5.3 percent per year indefinitely. Preferred stock: 9,800 shares of 4.65 percent preferred stock selling at $95.80 per share. The par value is $100 per share. Market: 10.2 percent expected return, risk - free rate of 4.5 percent, and a 23 percent tax rate. Calculate the company's WACC.