Calculate the companys cost of equity

Assignment Help Financial Management

Reference no: EM132057024

If Wild Widgets, Inc., were an all-equity company, it would have a beta of 1.85. The company has a target debt-equity ratio of .3.

The expected return on the market portfolio is 10 percent, and Treasury bills currently yield 6 percent.

The company has one bond issue outstanding that matures in 20 years and has a coupon rate of 11 percent. The bond currently sells for $1, 280. The corporate tax rate is 34 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.) Cost of debt

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.) Cost of equity

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.) WACC

Reference no: EM132057024

Questions Cloud

The expected dividend per share for each of the next years : The dividend is expected to grow 7% a year for the next 3 years and then at 5% a year thereafter.

The calculation of whackamoles wacc : WhackAmOle has 4 million shares of common stock outstanding, 3.0 million shares of preferred stock outstanding, and 95,000 bonds.

What would be the total contribution to profits from this : What would be the total contribution to profits from this new product during the first year? Profit = $ (Enter your response as an integer.)

Find the flotation cost as a percentage of funds raised : The company paid $915,000 in legal and other direct costs and $190,000 in indirect costs. What was the flotation cost as a percentage of funds raised?

Calculate the companys cost of equity : The expected return on the market portfolio is 10 percent, and Treasury bills currently yield 6 percent.

Choosing projects on the basis of the irr : Zumwalt Industries is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky

What is the amount to use as the annual sales figure : What is the amount to use as the annual sales figure when evaluating this project?

Find the value of the growth opportunities for each share : Its historical return on equity is 25%. The expected Shock return is 20%. What is the value of the growth opportunities for each share?

What is the stock price : The required return on this stock is 10%. What is the stock's price?

User Account

All Pages