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-The ABC wants to purchase a new asset costing $10 million. Their market value capital structure, shown below, is considered to be optimal (assume there is no short-term debt): Long-term Debt = $12,600,000, Common Equity = $18,900,000, and Total Capital =$31,500,000. Leo expects its earnings (and its dividends) to continue to grow at their historical rate of 5% per year for the indefinite future. The current risk-free rate is 7.8% and the expected return on the S&P 500 Index is 16.25%. Leo's appropriate levered equity beta is 0.80. Their bonds are currently trading at $1000 per bond, have a par value of $1000, an annual coupon rate of 12%, and a term to maturity of 12 years. Thus, the YTM on this bond is consistent with the current Debt Risk Premium between the S&P 500 Composite and long-term, high-grade bonds of 4.2%. The firm's tax rate is 34%.
-Calculate ABC's cost of equity
-Calculate ABC's cost of debt
-Calculate ABC's weighted average cost of capital (WACC).
What components make up an organization's capital structure? How may an organization go about developing its optimal capital structure?
The bonds are selling at 98 percent of face value. The company's tax rate is 34 percent. What is the firm's weighted average cost of capital?
A Canadian firm has to raise $ 1 0,000,000 and has decided to do so by selling zero coupon (or deep-discount bonds) with a maturity of 12 years.
Reflect on what you have accomplished relative to your professional goal during our course experience.
Use the following bond quote information reported by FINRA on this Akamai Technology Bond that pays semi-annual coupons to answer questions.
If the Treasury and corporate bonds have a par value of $1,000 and the municipal bond has a par value of $5,000, what is the price of these three bonds
Define inventory and discuss why inventories are maintained. What are the four Inventory Models?
Knowing that you have recently taken a class in corporate finance, Ms. Appleton has come to you for advice. What would you tell her?
Comment on that how the costing technique effects the income statement and balance sheet of that company. Also comment on the effectiveness of each method.
(Calculating operating cash flows) Assume that a new project will annually generate revenues of $2 million. Cash expenses including both fixed and variable.
Mullineaux Corporation has a target capital structure of 50 percent common stock, 5 percent preferred stock, and 45 percent debt. Its cost of equity is 9 percent, the cost of preferred stock is 4 percent, and the pretax cost of debt is 6 percent. ..
Sunrise Auto has an unlevered cost of capital of 11.9 percent, a total tax rate of 27 percent , and expected earnings before interest and taxes of $ 31,730.
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