Sapp Trucking's balance sheet shows a total of noncallable $45 million long-term debt with a coupon rate of 7.00% and a yield to maturity of 6.00%. This debtcurrently has a market value of $50 million. The balance sheet also shows that the company has 1o million shares of common stock, and the book value of thecommon equity (common stock plus retained earnings) is $65 million. The current stock price is $24.50 per share; stockholders' required return, rs, is 14.00%;and the firm's tax rate is 25%. The CFO thinks the WACC should be based on market value weights, but the president thinks book weights are more appropriate.What is the difference between these two WACCS?O a. 1.87%b. 3.11%О с. 2.28%d. 2.49%О е. 2.62%

WACC to be calculated for both book value and market value and the difference needs to be calculated

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What is the difference between these two WACCS?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Sapp Trucking's balance sheet shows a total of noncallable $45 million long-term debt with a coupon rate of 7.00% and a yield to maturity of 6.26 %. This debt currently has a market value of $50 million. The balance sheet also shows that the company has 10 million shares of common stock, and the book value of the common equity (common stock plus retained earnings) is $55 million. The current stock price is $20 per share; stockholders' required return, rs, is 21.83 % ; and the firm's tax rate is 40%. The CFO thinks the WACC should be based on market value weights, but the idiot president thinks book weights are more appropriate. What is the difference between these two WACCS?
Sapp Trucking’s balance sheet shows a total of noncallable $45 million long-term debt with a coupon rate of 7.00% and a yield to maturity of 6.00%. This debt currently has a market value of $50 million. The balance sheet also shows that the company has 10 million shares of common stock, and the book value of the common equity (common stock plus retained earnings) is $65 million. The current stock price is $28.50 per share; stockholders' required return, rs, is 14.00%; and the firm's tax rate is 40%. The CFO thinks the WACC should be based on market value weights, but the president thinks book weights are more appropriate. What is the difference between these two WACCs? Group of answer choices 2.57% 2.03% 2.70% 3.11% 3.38%
Sapp Trucking's balance sheet shows a total of noncallable $45 million long-term debt with a coupon rate of 7.00% and a yield to maturity of 6.00%. This debt currently has a market value of $50 million. The balance sheet also shows that the company has 10 million shares of common stock, and the book value of the common equity (common stock plus retained earnings) is $65 million. The current stock price is $24.50 per share; stockholders' required return, rs, is 14.00%; and the firm's tax rate is 25%. The CFO thinks the WACC should be based on market value weights, but the president thinks book weights are more appropriate. What is the difference between these two WACCs? a. 2.49% b. 2.28% c. 3.11% d. 2.62% e. 1.87%
Sapp Trucking's balance sheet shows a total of noncallable $50 million long-term debt with a coupon rate of 7.00% and a yield to maturity of 6.00%. This debt currently has a market value of $65 million. The balance sheet also shows that the company has 10 million shares of common stock, and the book value of the common equity (common stock plus retained earnings) is $95 million. The current stock price is $26.50 per share; stockholders' required return, rs. is 14.00%; and the firm's tax rate is 25%. The CFO thinks the WACC should be based on market value weights, but the president thinks book weights are more appropriate. What is the difference between hese two WACCs? Ⓒa. 0,67% Ob. 1.40% Oc1.18% Od. 1.04% e: 0.89%
ABC Trucking's balance sheet shows a total of noncallable $38 million long-term debt with a coupon rate of 7.40% and a yield to maturity of 8.90%. This debt currently has a market value of $53 million. The balance sheet also shows that the company has 10 million shares of common stock, and the book value of the common equity is $222.00 million. The current stock price is $24.70 per share; stockholders required return, rs, is 13.10%; and the firm's tax rate is 27.00%. The CFO thinks the WACC should be based on market value weights, but the president thinks book weights are more appropriate. What is the difference between the WACCS using market value and the book value? Work with at least 4 decimals and round your final answer to two decimal places. For example, if your answer is $345.6671 round as 345.67 and if your answer is .05718 or 5.7182% round as 5.72.
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Sapp Trucking's balance sheet shows a total of noncallable $30 million long-term debt with a coupon rate of 7.00% and a yield to maturity of 6.00%. This debt currently has a market value of $45 million. The balance sheet also shows that the company has 10 million shares of common stock, and the book value of the common equity (common stock plus retained earnings) is $60 million. The current stock price is $25.50 per share; stockholders' required return, rs, is 14.00%; and the firm's tax rate is 25%. The CFO thinks the WACC should be based on market value weights, but the president thinks book weights are more appropriate. What is the difference between these two WACCS? Ⓒa. 1.28% b. 1.47% c. 0.83% d. 1.74% e. 1.10 %
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ABC Trucking's balance sheet shows a total of noncallable $30 million long-term debt with a coupon rate of 6.80% and a yield to maturity of 8.10%. This debt currently has a market value of $48 million. The balance sheet also shows that the company has 10 million shares of common stock, and the book value of the common equity is $213.00 million. The current stock price is $23.80 per share; stockholders' required return, rs, is 15.05%; and the firm's tax rate is 36.00%. The CFO thinks the WACC should be based on market value weights, but the president thinks book weights are more appropriate. What is the difference between the WACCs using market value and the book value?Work with at least 4 decimals and round your final answer to two decimal places. For example, if your answer is $345.6671 round as 345.67 and if your answer is .05718 or 5.7182% round as 5.72. Group of answer choices –0.46% –0.49% –0.44% –0.34% –0.36%
Sans Souci Trucking's balance sheet shows a total of noncallable $40 million long-term debt with a coupon rate of 6.50% and a yield to maturity of 7.00%. This debt currently has a market value of $38.595 million. The balance sheet also shows that the company has 10 million shares of common stock, and the book value of the common equity (common stock plus retained earnings) is $60 million. The current stock price is $30.00 per share; stockholders' required return, rs, is 12.00%; and the firm's tax rate is 40%. The CFO thinks the WACC should be based on market value weights, but the president thinks book weights are more appropriate. What is the difference between these two WACCs?
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Roxie Epoxy’s balance sheet shows a total of $50 million long-term debt with a coupon rate of 8.00% and a yield to maturity of 7.00%. This debt currently has a market value of $55 million. The balance sheet also shows that that the company has 20 million shares of common stock, and the book value of the common equity (common stock plus retained earnings) is $65 million. The current stock price is $8.50 per share; stockholders' required return, rs, is 12%; and the firm's tax rate is 25%. Based on market value weights, and assuming the firm is currently at its target capital structure, what WACC should Roxie use to evaluate capital budgeting projects?

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