At what debt ratio is the company wacc minimized

Assignment Help Finance Basics
Reference no: EM13286502

Jackson Trucking Company is in the process of setting its target capital structure. The CFO believes the optimal debt-to-capital ratio is somewhere between 20% and 50%, and her staff has compiled the following projections for EPS and the stock price at various debt levels:

Debt/Capital........................Projected.....................Projected Stock
Ratio...................................EPS.............................Price

20%..................................$3.30..............................$34.75
30%..................................$3.40..............................$35.75
40%..................................$3.75..............................$36.25
50%..................................$3.60..............................$33.75

At what debt ratio is the company's WACC minimized? Round your answer to two decimal places.

 

Reference no: EM13286502

Questions Cloud

Derive equation of cyclotron resonance frequency of electron : Assume there is no electric field in this problem. Hint: angular acceleration is u2 /r where u is the velocity of the particle and r is the radius of the circular path. the frequency of the particles path is u/r.
Which of the following best describes a floating-rate bond : Which of the following best describes a floating-rate bond?
How many electrons per second hit the screen : The current in the electron beam of a computer monitor is 415 ?A. How many electrons per second hit the screen
Which of the following is true regarding bonds : Which of the following is true regarding bonds?
At what debt ratio is the company wacc minimized : At what debt ratio is the company's WACC minimized? Round your answer to two decimal places.
Find the current i to the y-axis and passing through a point : A ring conductor of radius 1 m is located on the xy-plane, centered at (0, 0, 0), and carries a current of 1 A in the counter-clockwise direction. A line conductor parallel to the y-axis and passing through (1, 0, 1) carries an unknown current I.
Explain what mass of the water would be boiled away : Suppose that a hotplate transfers 325KJ of energy to 450g of liquid water at 20C. What mass of the water would be boiled away
Find the acceleration due to gravity on jupiters surface : The mass of Jupiter is 300 times that of the earth, and the diameter is 11 times that of the earth, find the acceleration due to gravity on Jupiter's surface
Which of the following is true regarding the primary market : Which of the following is true regarding the primary market?

Reviews

Write a Review

Finance Basics Questions & Answers

  What other factors can impact bond valuation

Is your bond selling for a premium or at a discount based on your calculation? What other factors can impact bond valuation?

  What would be the new price of the bond

Compute the price of the bond (100=par) as of July 1, 2014 if the market requires a yield to maturity of 3.10%. If the market were to suddenly require the yield to rise to 3.50%, what would be the new price of the bond?

  Calculate necessary funds

Suppose your younger sister will start college in next 5-years. She has just informed your parents that she wants to go to Harvard University, which will cost $18,000 each year for four years.

  Compute new stock price

The capital structure of Ricketti Enterprises, Corporation, consists of ten million shares of common stock and 1 million warrants. Each warrant gives its owner the right to purchase one share of common stock for an exercise price of $15.

  Explain the differences showing appropriate calculations

There is also the option of taking an annuity, which would be one equal payment each year for 30 years. Explain the differences showing appropriate calculations. Do not consider taxes at this time. Include your opinions.

  Determine the price of stock

Suppose you believe that the Non-stick Gum Factory will pay a dividend of $2 on its common stock next year. Thereafter, you expect dividends to grow at a rate of 6% a year in perpetuity.

  Plan permitting

Considering Rachel has never taken a plan loan before, determine the maximum loan Rachel can take, plan permitting?

  Computation of receivables collection period and leverage

Computation of receivables collection period and leverage effect of the debt and What is times interest earned

  What is the weighted average cost of capital

The firm estimates its after-tax cost of debt to be 6%, cost of preferred stock to be 8%, and cost of new common stock to be 15%. What is the weighted average cost of capital?

  Control over retirement savings

How much control do you think you have over your own retirement savings? In other words, after all said and done in above, do you really think you can reasonably count on your retirement savings at the time of your retirement?

  Amortization expense for the patent

Lexicon Corporation purchased a patent for $600,000 on January 2, 2001, at which time the patent had an estimated useful life of ten years.

  How many customers would be expected to return to the same

According to a recent survey, 70% of all customers will return to the same grocery store. Suppose eight customers are selected at random.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd