Using 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%

Q: Walther enterprises has a capital structure target of 60 percent common equity, 15 percent preferred…

A: Weight of common equity (We) = 60% Weight of preferred stock (Wp) = 15% Weight of long term debt…

Q: The capital structure of Bulldogs Inc. is comprised of 50% ordinary stock, 25% preferred stock, and…

A: Formula: Weighted Average Cost of Capital = (Cost of Ordinary Stock X Weighted of Ordinary Stock) +…

Q: Majan Mining has found that its cost of common equity capital is 15 percent and its cost of debt…

A: Cost of Equity Capital = 15% Cost of Debt = 12% Tax Rate = 35% After tax cost of debt = Cost of Debt…

Q: Marginal Incorporated (MI) has determined that its before-tax cost of debt is 5.0% for the first $74…

A: Solution: In the given case,calculation of marginal cost of capital will consider cost of internal…

Q: ford motor corporation's capital structure consists of 60% debt, 10% preferred stock, and 30% common…

A: Capital Ratio Cost Debt 60% 6.50% Preferred stock 10% 8.00% Common equity 30% 12.00%   Tax…

Q: Marginal Incorporated (MI) has determined that its before-tax cost of debt is 10.0%. Its cost of…

A: (in million dollar) weight (%) Capital required(in million dollar) Value of debt 372 62 181.66…

Q: Suppose that B2B, Inc. has a capital structure of 35 percent equity, 16 percent preferred stock, and…

A: Calculation of WACC:The WACC is 9.59%.Excel Spreadsheet:

Q: An investor is considering investing in one of two firms (C and D). The WACC is 12% and the…

A: C firm is stronger compared to firm D.

Q: Bulldogs Inc., which is funded by debt and ordinary equity, has a debt to equity ratio of 100%. The…

A: Answer) Calculation of Applicable Tax Rate Weighted Average Cost of Capital = [(Weightage of Equity…

Q: Chamin, Inc. has earnings before interest and taxes (EBIT) of $375,000. Chamin has interest expense…

A: The degree of financial leverage shows the effect of fixed financial costs on the earnings of the…

Q: Nike, Inc., has a debt-equity ratio of 2.3.  The firm's weighted average cost of capital is 10…

A: Debt to equity ratio is 2.3, therefore, debt to total value (D/V) = 2.3/(1+2.3) = 0.696969696969697.…

Q: King’s Corp has determined that its before-tax cost of debt is 9.0%. Its cost of preferred stock is…

A: The question is based on the concept of Financial Accounting.

Q: Blue Co. is funded only by debt and equity with a weighted average cost of capital at 20%. The debt…

A: Weighted average cost of capital (WACC) = 20% Debt ratio = Weight of debt (Wd) = 20% or 0.2 Weight…

Q: Keziah Textiles, Inc. has a cost of equity of 10.8 percent. The company has an aftertax cost of debt…

A: COST OF EQUITY = 10.80% AFTER TAX COST OF DEBT = 5.10% DEBT TO EQUITY RATIO = 0.80

Q: Majan Mining has found that its cost of common equity capital is 15 percent and its cost of debt…

A: Introduction The Weighted Average Cost of Capital (WACC) of a company is the total cost of capital,…

Q: Croft Corporation has a target capital structure of 70 percent common stock and 30 percent debt. Its…

A: Common stock ratio (E) = 70% Debt ratio (D) = 30% Cost of equity (Ke) = 16% Cost of debt (Kd) = 8%…

Q: Fusion Packaging is financed with 55% equity and 45% debt.  The required rate of return on its debt…

A: Weight of equity (We) = 55% Weight of debt (Wd) = 45% Cost of debt (Rd) = 4.4% Cost of equity (Re) =…

Q: Williamson, Inc., has a debt-equity ratio of 3. The firm's weighted average cost of capital is 12…

A: The Weighted Average Cost of Capital WACC is calculated with the help of following formula  WACC =…

Q: Sandhill Co. has a capital structure, based on current market values, that consists of 35 percent…

A: Weight Average Cost Of capital  The weighted normal expense of capital (WACC) is a computation…

Q: Capital Co. has a capital structure, based on current market values, that consist of 50% debt, 10%…

A:

Q: Key Motors has a cost of equity of 14.26 percent and an unlevered cost of capital of 11.34 percent.…

A: levered cost of equity formula: re=ru+DV-D×ru -rd×1-taxwhere,re= levered cost of equityru= unlevered…

Q: The Bigelow Company has a cost of equity of 12 percent, a pre-tax cost of debt of 7 percent, and a…

A: WACC (weighted average cost of capital) refers to the average cost that is paid by a company to…

Q: Majan Mining has found that its cost of common equity capital is 15 percent and its cost of debt…

A: The cost of capital is the cost that is incurred by a corporation on the acquisition of capital from…

Q: Suppose that TW, Inc. has a capital structure of 25 percent equity, 15 percent preferred stock, and…

A: Weighted Average Cost of Capital (WACC) is the overall cost of capital from all the sources of…

Q: Croft Corporation has a target capital structure of 70 percent common stock and 30 percent debt. Its…

A: The provided information are: Common stock = 70% Debt = 30% Cost of equity = 18% Cost of debt = 6%…

Q: Majan Mining has found that its cost of common equity capital is 15 percent and its cost of debt…

A: Given that,  cost of common equity capital is 15 percent cost of debt capital is 12 percent common…

Q: If its current tax rate is 40%, Turnbull’s weighted average cost of capital (WACC) will be  (1.23 /…

A:

Q: Mullineaux Corporation has a target capital structure of 41 percent common stock, 4 percent…

A: given, we=415wp=4%wd=55%re=19%rp=6.5%rd=7.5%tax= 34%

Q: Black Inc.'s capital structure consists entirely of long-term debt and common equity. The cost of…

A: Cost of long term debt = 5% Tax rate = 40% After tax cost of debt (RD) = 5%*(1-0.40)…

Q: Take It All Away has a cost of equity of 10.57 percent, a pretax cost of debt of 5.29 percent, and a…

A: A company has several sources from where it can raise funds. It can issue equity shares and the…

Q: Suppose that MNINK Industries’ capital structure features 63 percent equity, 8 percent preferred…

A: WACC refers to a firm's weighted average cost of capital. It is the rate that a firm  pays to its…

Q: Johansen Corporation has a target capital structure of 60 percent common stock and 40 percent debt.…

A: Calculation of WACC:The WACC is 8.88%.Excel Spreadsheet:

Q: What is the WACC for a firm with 40% debt, 20% preferred stock, and 40% equity if the respective…

A: Let Wd = Weight of debt = 40% Wp = Weight of preferred stock = 20% We = Weight of equity = 40% Let…

Q: Debreu Beverages has an optimal capital structure that is 70% common equity, 20% debt, and 10%…

A: Weighted average cost of capital =(weight of equity*cost of equity) + (weight of debt*after tax cost…

Q: You were hired as a consultant to ABC Company, whose target capital structure is 35% debt, 15%…

A: The Weighted average cost of capital(WACC) is the average cost of capital, in which each category of…

Q: SLG Corp. is an all-equity firm with a weighted average cost of capital of 10.02 percent. The…

A: The operating that is evaluated after deducting the operating expenses from the revenue is term as…

Q: Cullumber Co. has a capital structure, based on current market values, that consists of 40 percent…

A: Given information: Weights : Debt: 40% Preferred stock : 19% Common stock : 41% Cost : Debt : 9%…

Q: Suppose that TapDance, Inc.'s capital structure features 65 percent equity, 35 percent debt, and…

A: WACC = (Market weight of equity × Cost of equity) + (Market value of debt × post tax Cost of debt)

Q: Salalah Mineral water has found that its cost of common equity capital is 18 percent and its cost of…

A: WACC is the cost of capital for the firm.

Q: Mullineaux Corporation has a target capital structure of 70 percent common stock, 5 percent…

A: Weighted average cost of capital = ∑weight*cost of capital Cost of debt = pre tax cost of debt…

Q: What is Ningbo Shipping's WACC if it's after tax cost of retained earnings is 14%, and the firm's…

A: Weighted Average Cost of Capital is referred to as the calculation of the cost of capital of the…

Q: Bulldogs Inc., which is funded by debt and ordinary equity, has a debt to equity ratio of 100%. The…

A: The cost of debt is tax-deductible and hence its effective cost is different.

Q: David Ortiz Motors has a target capital structure of 40% debt and 60% equity. The yield to maturity…

A: Given: Capital structure: Debt = 40% Equity = 60% Long term debt security = 9% Tax rate = 40% WACC…