Corporate Finance
12th Edition
ISBN: 9781259918940
Author: Ross, Stephen A.
Publisher: Mcgraw-hill Education,
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Chapter 13, Problem 11QAP
Summary Introduction
Adequate information:
Bonds outstanding
Common stock outstanding
Beta of the stock
Current price per share
Coupon rate of Bond
Face
Selling rate of Bond
Price of Bond
Term duration of Bond
Number of compounding periods in a year
Risk-free rate
Market risk premium
Tax rate
To compute: WACC for company H.
Introduction: The Weighted average cost of capital (WACC) refers to the cost of capital from various sources such as common stocks, preferred stocks, bonds, etc.
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Given the following information for Electric Transport, find the WACC. Assume the company's tax rate is 34 percent.Debt: 7,500, 8.4 percent coupon bonds outstanding. $1,000 par value, 22 years to maturity, selling for 103 percent of par, the bonds make semiannual payments.Common stock: 195,000 shares outstanding, selling for $78 per share, beta is 1.21.Preferred stock: 11,000 shares of 6.35 percent preferred stock outstanding, currently selling for $76 per share.Market: 8 percent market risk premium and 5.1 percent risk-free rate.
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Given the following information for Electric Transport, find the WACC. Assume the company's tax rate is 34 percent.Debt: 7,500, 8.4 percent coupon bonds outstanding. $1,000 par value, 22 years to maturity, selling for 103 percent of par, the bonds make semiannual payments.Common stock: 195,000 shares outstanding, selling for $78 per share, beta is 1.21.Preferred stock: 11,000 shares of 6.35 percent preferred stock outstanding, currently selling for $76 per share.Market: 8 percent market risk premium and 5.1 percent risk-free rate.
You are given the following information for Tara Ita Power Co. Assume the company’s tax rate is 22 percent.
Debt:
5,000 6.6 percent coupon bonds outstanding, $1,000 par value, 20 years to maturity, selling for 109 percent of par; the bonds make semiannual payments.
Common stock:
380,000 shares outstanding, selling for $56 per share; the beta is 1.12.
Market:
5 percent market risk premium and 4.6 percent risk-free rate.
What is the company's WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Chapter 13 Solutions
Corporate Finance
Ch. 13 - Project Risk If you can borrow all the money you...Ch. 13 - WACC and Taxes Why do we use an aftertax figure...Ch. 13 - SML Cost or Equity Estimation If you use the stock...Ch. 13 - SML Cost or Equity Estimation What are the...Ch. 13 - Prob. 5CQCh. 13 - Cost of Capital Suppose Tom OBedlam, president of...Ch. 13 - Company Risk versus Project Risk Both Dow Chemical...Ch. 13 - Prob. 8CQCh. 13 - Leverage Consider a levered firms projects that...Ch. 13 - Beta What factors determine the beta of a stock?...
Ch. 13 - Prob. 1QAPCh. 13 - Prob. 2QAPCh. 13 - Prob. 3QAPCh. 13 - Prob. 4QAPCh. 13 - Prob. 5QAPCh. 13 - Prob. 6QAPCh. 13 - Prob. 7QAPCh. 13 - Prob. 8QAPCh. 13 - Prob. 9QAPCh. 13 - Prob. 10QAPCh. 13 - Prob. 11QAPCh. 13 - Prob. 12QAPCh. 13 - Prob. 13QAPCh. 13 - Prob. 14QAPCh. 13 - Prob. 15QAPCh. 13 - Prob. 16QAPCh. 13 - Prob. 17QAPCh. 13 - Prob. 18QAPCh. 13 - Prob. 19QAPCh. 13 - Prob. 20QAPCh. 13 - Prob. 21QAPCh. 13 - Prob. 22QAPCh. 13 - Prob. 23QAPCh. 13 - Prob. 24QAPCh. 13 - Prob. 1MCCh. 13 - Prob. 2MCCh. 13 - Go to www.reuters.com and find the list of...Ch. 13 - You now need to calculate the cost of debt for...Ch. 13 - You now have all the necessary information to...Ch. 13 - You used Tesla as a representative company to...
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