The common stock of Buildwell Conservation & Construction Inc. (BCCI) has a beta of 0.9. The Treasury bill rate is 4%, and the market risk premium is estimated at 10%. BCCI’s capital structure is 25% debt, paying an interest rate of 8%, and 75% equity. The debt sells at par. Buildwell pays tax at 21%. What is BCCI’s cost of equity capital? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

The common stock of Buildwell Conservation & Construction Inc. (BCCI) has a beta of 0.9. The Treasury bill rate is 4%, and the market risk premium is estimated at 10%. BCCI’s capital structure is 25% debt, paying an interest rate of 8%, and 75% equity. The debt sells at par. Buildwell pays tax at 21%. What is BCCI’s cost of equity capital? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter15: Capital Structure Decisions

Section: Chapter Questions

Problem 11P: The Rivoli Company has no debt outstanding, and its financial position is given by the following...

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The Rivoli Company has no debt outstanding, and its financial position is given by the following data: What is Rivoli’s intrinsic value of operations (i.e., its unlevered value)? What is its intrinsic stock price? Its earnings per share? Rivoli is considering selling bonds and simultaneously repurchasing some of its stock. If it moves to a capital structure with 30% debt based on market values, its cost of equity, rs, will increase to 12% to reflect the increased risk. Bonds can be sold at a cost, rd, of 7%. Based on the new capital structure, what is the new weighted average cost of capital? What is the levered value of the firm? What is the amount of debt? Based on the new capital structure, what is the new stock price? What is the remaining number of shares? What is the new earnings per share?
The total book value of WTC's equity is $13 million, and book value per share is $20. The stock has a market-to-book ratio of 1.5, and the cost of equity is 9%. The firms bonds have a face value of $9 million and sell at a price of 110% of face value. The yield to maturity on the bonds is 7% andthe firm's tax rate is 21%. What is the company's WACC? (Don't round intermediate calculations, enter final answers as a percent rounded to 2 decimal places.)
he total book value of WTC’s equity is $7 million, and book value per share is $14. The stock has a market-to-book ratio of 1.5, and the cost of equity is 12%. The firm’s bonds have a face value of $4 million and sell at a price of 110% of face value. The yield to maturity on the bonds is 9%, and the firm’s tax rate is 21%. What is the company’s WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) WACC= ______%
The common stock of Buildwell Conservation & Construction Incorporated (BCCI) has a beta of 0.9. The Treasury bill rate is 4%, and the market risk premium is estimated at 8%. BCCI’s capital structure is 30% debt, paying an interest rate of 5%, and 70% equity. The debt sells at par. Buildwell pays tax at 21%. What is BCCI’s cost of equity capital? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place. What is its WACC? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. If BCCI is presented with a normal project with an internal rate of return of 12%, should it accept the project if it has the same level of risk as the current firm?
Currently, Bloom Flowers Inc. has a capital structure consisting of20% debt and 80% equity. Bloom's debt currently has an 8% yield to maturity. The risk-free rate (rgr) is 5%, and the market risk premium (ry ~ rer) is 6%. Using the CAPM, Bloom estimates that its cost of equity is currently 12.5%. The company has a 40% tax rate.a. Whatis Bloom's current WACC?b. What is the current beta on Bloom's common stock?c. What would Bloom’s beta be if the company had no debt in its capital structure? (That is, what is Bloom’s unlevered beta, by?)Bloom’s financial staff is considering changing its capital structure to 40% debt and 60% equity. If the company went ahead with the proposed change, the yield to maturity on the company’s bonds would rise to 9.5%. The proposed change will have no effect on the company’s tax rate.d. What would be the company’s new cost of equily if it adopted the proposed change in capital structure?e. What would be the company’s new WACC if it adopted the proposed change…
The market risk premium for FCIB is 9 percent, and has a tax rate of 35 percent. The risk-free rate of interest is 5%. Willow-Woods Inc. has a capital structure comprised of the following: 8,500,000 shares of common stock outstanding,  200,000 shares of 7 percent preferred stock outstanding, and 85,000, 8.5 percent semiannual bonds outstanding, par value of $1,000 each. The common stock currently sells for $34 per share and has a beta of 1.2, the preferred stock currently sells for $83 per share, and the bonds have 15 years to maturity and sell for 93 percent of par.a) What is the market value of Willow-Woods’ capital structure? b) What rate should Willow-Woods should use to discount the cash flows of a new investment project that has the same risk as the company’s typical project?
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Kline Construction is an all-equity firm that has projected perpetual EBIT of $292,000. The current cost of equity is 11.6 percent and the tax rate is 23 percent. The company is in the process of issuing $908,000 worth of perpetual bonds with an annual coupon rate of 5.8 percent at par. What is the value of the levered firm?
Delta Lighting has 24,500 shares of 5 common stock outstanding at a market price of $ 19 a share . This stock was originally issued at $ 21 per share . The firm also has a bond issue outstanding with a total face value of $ 150,000 which is selling for 94 percent of par . The cost of equity is 12.6 percent while the aftertax cost of debt is 5.8 percent . The firm has a beta of 1.33 and a tax rate of 23 percent . What is the weighted average cost of ?capital
Currently, Forever Flowers Inc. has a capital structure consisting of 30% debt and 70% equity. Forever's debt currently has an 7% yield to maturity. The risk-free rate (rRF) is 4%, and the market risk premium (rM - rRF) is 5%. Using the CAPM, Forever estimates that its cost of equity is currently 13%. The company has a 25% tax rate. What is Forever's current WACC? Round your answer to two decimal places. % What is the current beta on Forever's common stock? Round your answer to two decimal places. What would Forever's beta be if the company had no debt in its capital structure? (That is, what is Forever's unlevered beta, bU?) Do not round intermediate calculations. Round your answer to two decimal places. Forever's financial staff is considering changing its capital structure to 40% debt and 60% equity. If the company went ahead with the proposed change, the yield to maturity on the company's bonds would rise to 9.5%. The proposed change will have no effect on the…
Kline Construction is an all-equity firm that has projected perpetual EBIT of $376,000. The current cost of equity is 13.7 percent and the tax rate is 21 percent. The company is in the process of issuing $992,000 worth of perpetual bonds with an annual coupon rate of 5.5 percent at par. What is the value of the levered firm? Multiple Choice $1,482,044 $2,168,175 $1,936,600 $2,376,495 $1,829,684
wilson's has 10,000 shares of common stock outstanding at a market price of $35 a share. the firm also has a bond issue outstanding with a total face value of 250,000 which is selling for 102% of face value. the cost of equity is 11% while the pre-tax cost of debt is 8%. the firm has a beta of 1.1 and a tax rate of 34%. what is wilson's weighted average cost of capital?