GEN CMB LL CORP FINC; CNCT
11th Edition
ISBN: 9781259724145
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher: McGraw-Hill Education
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Chapter 18, Problem 4QP
a.
Summary Introduction
To Determine: The Cost of Debt of the Company.
Introduction: The cost of capital is the WACC (Weighted Average Cost of Capital) is the total
b.
Summary Introduction
To Determine: The
c.
Summary Introduction
To Determine: The Weighted Average Cost of Capital.
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If Wild Widgets, Inc., were an all-equity company, it would have a beta of .90. The company has a target debt-equity ratio of .60. The expected return on the market portfolio is 11 percent and Treasury bills currently yield 3.3 percent. The company has one bond issue outstanding that matures in 26 years, a par value of $2,000, and a coupon rate of 6 percent. The bond currently sells for $2,130. The corporate tax rate is 24 percent.
a.
What is the company’s cost of debt?
What is the company’s cost of equity?
What is the company’s weighted average cost of capital?
If Smolinski, Incorporated, were an all-equity company, it would have a beta of.95. The company has a target debt - equity ratio of .50. The expected return on the market portfolio is 12 percent and Treasury bills currently yield 3.1 percent. The company has one bond issue outstanding that matures in 25 years, a par value of $1,000, and a coupon rate of 6 percent. The bond currently sells for $ 1,050. The corporate tax rate is 23 percent. a. What is the company's cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g ., 32.16.) b. What is the company's cost of equity? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c. What is the company' s weighted average cost of capital? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e. g., 32.16.)
If Wild Widgets Inc. were an all-equity company, it would have a beta of 1.50. The company has a target debt-to-equity ratio of 0.4. The expected return on the market portfolio is 11 percent, and Treasury bills currently yield 5.3 percent. The company has one bond issue outstanding that matures in 20 years and has a 9.6 percent coupon rate. The bond currently sells for $1,210. The corporate tax rate is 34 percent.
a. What is the company’s cost of debt? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit % sign in your response.)
b. What is the company’s cost of equity? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit % sign in your response.)
c. What is the company’s WACC? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit % sign in your response.)
Chapter 18 Solutions
GEN CMB LL CORP FINC; CNCT
Ch. 18 - APV How is the APV of a project calculated?Ch. 18 - WACC and APV What is the main difference between...Ch. 18 - FTE What is the main difference between the FTE...Ch. 18 - Prob. 4CQCh. 18 - Prob. 5CQCh. 18 - NPV and APV Zoso is a rental car company that is...Ch. 18 - APV Gemini, Inc., an all-equity firm, is...Ch. 18 - Prob. 3QPCh. 18 - Prob. 4QPCh. 18 - Prob. 5QP
Ch. 18 - Prob. 6QPCh. 18 - Prob. 7QPCh. 18 - WACC National Electric Company (NEC) is...Ch. 18 - WACC Bolero, Inc., has compiled the following...Ch. 18 - Prob. 10QPCh. 18 - Prob. 11QPCh. 18 - APV MVP, Inc., has produced rodeo supplies for...Ch. 18 - Prob. 13QPCh. 18 - Prob. 14QPCh. 18 - Prob. 15QPCh. 18 - Prob. 16QPCh. 18 - Prob. 17QPCh. 18 - Prob. 18QPCh. 18 - Prob. 1MC
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