Suppose Woodsburg’s capital structure is 60% equity and 40% debt, and that its marginal tax rate increases. What will happen to Woodsburg’s weighted average cost of capital (WACC
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Suppose Woodsburg’s capital structure is 60% equity and 40% debt, and that its marginal tax rate increases. What will happen to Woodsburg’s weighted average cost of capital (WACC)?
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- 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?Suppose the weighted average cost of capital of the Oriole Company is 10 percent. If Oriole has a capital structure that is 50 percent debt and 50 percent equity, its before-tax cost of debt is 7 percent, and its marginal tax rate is 20 percent, then its cost of equity capital is closest to: a. 10.40 percent. b. 12.40 percent. c. 8.40 percent. d. 14.40 percent.Suppose that your firm has a cost of equity of 10%, cost of preferred stock of 8%, and an after-tax cost of debt of 6%. If the firm has 30% in debt, 5% in preferred stock, and 65% in equity, what is the firm's weighted average cost of capital (WACC)? Tax rate is 20%.
- The Beta Corporation has an optimal debt ratio of 40 percent. Its cost of equity capital is 10 percent, and its before-tax borrowing rate is 7 percent. Given a marginal tax rate of 35 percent. Required: A. Calculate the weighted-average cost of capital. B. Calculate the cost of equity for an equivalent all-equity financed firm.Suppose that TW, Inc. has a capital structure of 25 percent equity, 15 percent preferred stock, and 60 percent debt. If the before-tax component costs of equity, preferred stock and debt are 13.5 percent, 9.5 percent and 4 percent, respectively, what is TW's WACC if the firm faces an average tax rate of 21 percent?Suppose that MNINK industries' capital structure features 63 percent equity, 7 percent preferred stock, and 30 percent debt. If the before-tax component costs of equity, preferred stock, and debt are 11.60 percent, 9.5 percent, and 9 percent, respectively, what is MNINK's WACC if the firm faces an average tax rate of 21 percent and can make full use of the interest tax shield?
- You want to estimate the Weighted Average Cost of Capital (WACC) for Levi Inc. The company’s tax rate is 21% and it has the equity beta of 1.24. Its debt value is $2,304 million and the equity market value is $70,080 million. The company’s interest expense is $83 million. Assume that the risk-free rate is 5% and the market return is 12%. Based on the information, compute the WACC for LeviUsing the WACC in practice: Maloney’s, Inc., has found that its cost of common equity capital is 17 percent and its cost of debt capital is 6 percent. If the firm is financed with $3,000,000 of common shares (market value) and $2,000,000 of debt, then what is the after-tax weighted average cost of capital for Maloney’s if it is subject to a 40 percent marginal tax rate? 8.96% 11.16% 11.64% 12.60%After careful analysis, Excellence Berhad has determined its optimal capital structure as shown in the following table. Source of capital Target market value weight Long-term debt 30% Preference share 15% Ordinary share 55% Total 100% The cost of debt is estimated to be 7.2%; the cost of preference share is estimated to be 13.5%, the cost of retained earnings is estimated to be 16%; and the cost of new ordinary share is estimated to be 18%. All of these are after-tax rates. Excellence Berhad expects to have a significant amount of retained earnings available and does not intend to sell any new ordinary share. Calculate the WACC of Excellence Berhad
- Suppose that PAW, Incorporated has a capital structure of 60 percent equity, 10 percent preferred stock, and 30 percent debt. If the before-tax component costs of equity, preferred stock and debt are 17.5 percent, 12 percent and 6.5 percent, respectively, what is PAW's WACC if the firm faces an average tax rate of 21 percent?Walther enterprises has a capital structure target of 60 percent common equity, 15 percent preferred stock, and 25 percent long-term debt. Walther’s financial analysts have estimated the marginal after tax cost of debt, preferred stock, and common equity to be 5 percent, 8.5 percent, and 11 percent, respectively. What is the weighted marginal cost of capital for Walther?Suppose that TipsNToes, Inc.'s capital structure features 75 percent equity, 25 percent debt, and its cost of equity is 12 percent, while its before-tax cost of debt is 10 percent. If the appropriate weighted average tax rate is 20 percent, what will be TipsNToes's after-tax WACC?
