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Calculate the WACC for PG given the following: a) The company has outstanding debt that matures in 20 years that has a coupon of 9%. It pays interest semi-annually and the bonds are callable in 3 years at a 3% premium to par. The current price of the bonds is 1214.59. For a reference 20 year Treasuries are yielding 3.5%. (PG bonds are rated AA) b) PG has outstanding preferred that have an 8% coupon, $100 par value and is currently priced at $120. If new preferred was issued the company would incur flotation costs of 5%. c) The company’s stock is currently priced at $100 and the current dividend is $3.00. That dividend is expected to grow at 3% forever. The beta of PG is 0.6 and the RFR and MRP are 3% and 7% respectively. Ignore flotation costs for your cost of equity. d) The target structure is 60% equity, 30% debt and 10% preferred. The tax rate is 40%. e) If the company had no residual cash and new issued equity would incur a flotation cost of 10%. Calculate a new the WACC using only the DCF method for equity and keeping all other factors the same. Comment on your findings
Movements in Cross-Exchange Rates. Last year a dollar was equal to 7 Swedish kronor, and a Polish zloty was equal to $.40. Today, the dollar is equal to 8 Swedish kronor, and a Polish zloty is equal to $.44. By what percentage did the cross-exchange ..
A company is considering an investment project with the following cash flows: Year 0 = -$160,000 (initial costs); Year 1= $50,000; Year 2 =$80,000; and Year 3 = $65,000.The company has a 8% cost of capital, calculate the NPV for the project ______
The market value of the marketing research firm Fax Facts is $900 million. The firm issues an additional $150 million of stock, but as a result the stock price falls by 2%. What is the cost of the price drop to existing shareholders as a fraction of ..
What is the accumulated sum of each of the following streams of payments?
The 2014 balance sheet of Sugarpova’s Tennis Shop, Inc., showed $580,000 in the common stock account and $3.5 million in the additional paid-in surplus account. The 2015 balance sheet showed $620,000 and $3.9 million in the same two accounts, respect..
Jackson Corporation's bonds have 5 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 10.5%. The bonds have a yield to maturity of 8%. What is the current market price of these b..
you have been hired as an outside consultant by a board member of ipc to help with assisting the company strategy in
What is the cost of goods sold?
When projected assets are more than projected liabilities and owners’ equity, the plug will be
A recent college graduate has taken a new job at Work LLC and since the company does not offer a traditional pension plan, she plans to take advantage of a tax-free investment account backed by a reputable financial institution that offers a guarante..
A Treasury issue is quoted at 107:17 bid and 107:31 ask. Assume a face value of $1,000. What is the least you could pay to acquire a bond?
Corporations often use different costs of capital for different operating divisions. Using an example, calculate the weighted cost of capital (WACC). What are some potential issues in using varying techniques for cost of capital for different divisio..
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