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WACC Weights BetterPie Industries has 3 million shares of common stock out- standing, 2 million shares of preferred stock outstanding, and 10,000 bonds. If the common shares are selling for $47 per share, the preferred shares are selling fo $24.50 per share, and the bonds are selling for 99 percent of par, what would be the weights used in the calculation of BetterPie's WACC? (LG11-4)

WACC Weights BetterPie Industries has 3 million shares of common stock out- standing, 2 million shares of preferred stock outstanding, and 10,000 bonds. If the common shares are selling for $47 per share, the preferred shares are selling fo $24.50 per share, and the bonds are selling for 99 percent of par, what would be the weights used in the calculation of BetterPie's WACC? (LG11-4)

EBK CFIN
EBK CFIN
6th Edition
ISBN:9781337671743
Author:BESLEY
Publisher:BESLEY
Chapter3: The Financial Environment: Markets, Institutions And Investment Banking
Section: Chapter Questions
Problem 20PROB
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100%

11-21 weight of bonds =5%

11-25 project A actual required return is 7.5%

 

11-21 WACC Weights BetterPie Industries has 3 million shares of common stock out- standing, 2 million shares of preferred stock outstanding, and 10,000 bonds. If the common shares are selling for $47 per share, the preferred shares are selling for $24.50 per share, and the bonds are selling for 99 percent of par, what would be the weights used in the calculation of BetterPie's WACC? (LG11-4)
Transcribed Image Text:11-21 WACC Weights BetterPie Industries has 3 million shares of common stock out- standing, 2 million shares of preferred stock outstanding, and 10,000 bonds. If the common shares are selling for $47 per share, the preferred shares are selling for $24.50 per share, and the bonds are selling for 99 percent of par, what would be the weights used in the calculation of BetterPie's WACC? (LG11-4)
11-25 Firmwide versus Project-Specific WACCS An all-equity firm is considering the projects shown below. The T-bill rate is 4 percent and the market risk premium is 7 percent. If the firm uses its current WACC of 12 percent to evaluate these projects, which project(s), if any, will be incorrectly rejected? (LG11-6) Project Expected Return Beta A 8.0% 0.5 19.0 1.2 C 13.0 1.4 17.0 1.6
Transcribed Image Text:11-25 Firmwide versus Project-Specific WACCS An all-equity firm is considering the projects shown below. The T-bill rate is 4 percent and the market risk premium is 7 percent. If the firm uses its current WACC of 12 percent to evaluate these projects, which project(s), if any, will be incorrectly rejected? (LG11-6) Project Expected Return Beta A 8.0% 0.5 19.0 1.2 C 13.0 1.4 17.0 1.6
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