Average implied by the two outstanding debt issues

Assignment Help Financial Management

Reference no: EM13917445

Filer Manufacturing has 8.4 million shares of common stock outstanding. The current share price is $54, and the book value per share is $5. Filer manufacturing also has two bond issues outstanding. The first bond issue has a face value of $70.2 million and a coupon rate of 7.1 percent and sells for 108.2 percent of par. The second issue has a face value of $60.2 million and a coupon rate of 7.6 percent and sells for 109.1 percent of par. The first issue matures in 9 years, the second in 26 years. Suppose the company’s stock has a beta of 1.3. The risk-free rate is 3.2 percent, and the market risk premium is 7.1 percent. Assume that the overall cost of debt is the weighted average implied by the two outstanding debt issues. Both bonds make semiannual payments. The tax rate is 40 percent. What is the company’s WACC?

Reference no: EM13917445

Questions Cloud

Sale of an asset that is depreciable and used in business : A loss on the sale of an asset that is depreciable and used in business is ________; a loss on the sale of a non-depreciable asset is ________.

A job is known to have a learning percentage : A job is known to have a learning percentage equal to 82. If the first unit had a completion time of 20 hours, estimate the times that will be needed to complete the third and fourth units.

Filers capital structure weights on market value basis : Filer Manufacturing has 9 million shares of common stock outstanding. The current share price is $75, and the book value per share is $6. Filer manufacturing also has two bond issues outstanding. What are Filer's capital structure weights on a book v..

He estimates that the first job will take his crew eight : He estimates that the first job will take his crew eight days to install. How many days should the contractor budget for?

Average implied by the two outstanding debt issues : Filer Manufacturing has 8.4 million shares of common stock outstanding. The current share price is $54, and the book value per share is $5. Filer manufacturing also has two bond issues outstanding. Assume that the overall cost of debt is the weighted..

Considering expanding operations to meet growing demand : A corporation is considering expanding operations to meet growing demand. With the capital expansion, the current accounts are expected to change. Management expects cash to increase by $20,000, accounts receivable by $40,000, and inventories by $60,..

Estimate the time it will take to complete the fourth : Estimate the time it will take to complete the fourth unit of a 12 unit job involving a large assembly if the initial unit required approximately 80 hours for each of these learning percentages

An aircraft company has an order to refurbish the interiors : An aircraft company has an order to refurbish the interiors of 18 jet aircraft. The work has a learning curve percentage of 80. On the basis of experience with similar jobs, the industrial engineering department estimates that the first plane will..

Earnings expectations play in quality of earnings : In Arthur Levitt's speech, referred to in the opening quote, he also said: "I fear that we are witnessing erosion in the quality of earnings and therefore, the quality of financial reporting. What role does financial analysts' earnings expectations ..

User Account

All Pages