Templeton Extended Care Facilities, Inc. is considering the acquisition of a chain of cemeteries for $400 million. Because the primary asset of this business is real estate, Templeton’s management has determined that they will be able to borrow the majority of the money needed to buy the business. The current owners have no debt financing but Templeton plans to borrow $300 million and invest only $100 million in equity ($40 million in Preferred Shared and $60 million in Common Shares) in the acquisition. Templeton is issuing new common stock at a market price of $27. Dividends last year were $1.45 and are expected to grow at an annual rate of 6% forever. Templeton is issuing a $1000 par value bond that pays 8% annual interest and matures in 15 years. Investors are willing to pay $950 for the bond and Temple faces a tax rate of 35%. The preferred stock of Templeton currently sells for $36 a share and pays $2.50 in dividends annually What is the Weighted Average Cost of capital?
Templeton Extended Care Facilities, Inc. is considering the acquisition of a chain of cemeteries for $400 million. Because the primary asset of this business is real estate, Templeton’s management has determined that they will be able to borrow the majority of the money needed to buy the business. The current owners have no debt financing but Templeton plans to borrow $300 million and invest only $100 million in equity ($40 million in Preferred Shared and $60 million in Common Shares) in the acquisition. Templeton is issuing new common stock at a market price of $27. Dividends last year were $1.45 and are expected to grow at an annual rate of 6% forever. Templeton is issuing a $1000 par value bond that pays 8% annual interest and matures in 15 years. Investors are willing to pay $950 for the bond and Temple faces a tax rate of 35%. The preferred stock of Templeton currently sells for $36 a share and pays $2.50 in dividends annually What is the Weighted Average Cost of capital?
Chapter7: Valuation Of Stocks And Corporations
Section: Chapter Questions
Problem 1lM
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- Templeton Extended Care Facilities, Inc. is considering the acquisition of a chain of cemeteries for $400 million. Because the primary asset of this business is real estate, Templeton’s management has determined that they will be able to borrow the majority of the money needed to buy the business. The current owners have no debt financing but Templeton plans to borrow $300 million and invest only $100 million in equity ($40 million in
Preferred Shared and $60 million in Common Shares) in the acquisition.
- Templeton is issuing new common stock at a market price of $27. Dividends last year were $1.45 and are expected to grow at an annual rate of 6% forever.
- Templeton is issuing a $1000 par
value bond that pays 8% annual interest and matures in 15 years. Investors are willing to pay $950 for the bond and Temple faces a tax rate of 35%. - The preferred stock of Templeton currently sells for $36 a share and pays $2.50 in dividends annually
What is the Weighted Average Cost of capital?
- Calculate the cash conversion cycle for Hewlett-Packard with days sales outstanding as 52.51, days inventory as 27.27, days payables outstanding as 55.51.
- Your company is offered terms of trade of 2/10, net 30 but is not able to take the 2% discount. In other words, you don't have the cash flow to pay the bill and receive the discount within 10 days, what is this going to cost you?
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