Calculate the firms weighted average cost of capital

Assignment Help Financial Management

Reference no: EM13809227

Given the following information, calculate the firm's weighted average cost of capital (WACC). Market value of common stock=$60 million; market value of preferred stock=$10 million, market value of debt=$30 million; cost of common stock=15%; cost of debt=10%; tax rate=40%. The preferred stock pays a constant $4 dividend and is now selling for $50 a share.

A. 11.60%

B. 12.60%

C. 12.97%

D. 13.32%

Reference no: EM13809227

Questions Cloud

Under the theory of negligence : The Smith family was traveling on their summer vacation from Massachusetts to Wyoming. Along the way, the family was involved in an accident when they proceeded to drive through an intersection; Is Mr. Smith correct? Where could he sue Mr. Jones? Ex..

Potential problems regarding the statute of frauds : Select three types of contracts that are required to be in writing under the Statute of Frauds. Then, assume you are the instructor of a group of young students and help them understand why we have the Statute of Frauds. Propose 1 solution to the pot..

Statements regarding cost of capital : Which of the following statements regarding cost of capital is incorrect?

What is its cash cycle : A firm has an inventory turnover of 8.11, an inventory period of 45 days, average inventory of $650,000, a receivables period of 32 days, and average payables of $750,000. What is its cash cycle?

Calculate the firms weighted average cost of capital : Given the following information, calculate the firm's weighted average cost of capital (WACC). Market value of common stock=$60 million; market value of preferred stock=$10 million, market value of debt=$30 million; cost of common stock=15%; cost of ..

Remainder is invested in T-Bills : You have $100,000 invested. Of that, $50,000 is invested in IVM stock which has a beta of 1.4, $30,000 is invested in UBM stock with a beta of 1.2, and the remainder is invested in T-Bills. Which of the following is true?

What will be the value of equity after the restructuring : Consider an unlevered firm with EBIT of $6 million and 1 million shares of common equity outstanding. The required rate of return on the firm’s assets is 10%. The firm has a corporate tax rate of 40%. The firm is considering issuing $18 million in de..

Net income-total asset turnover-equity multiplier : You are considering investing in Dakota’s Security Services. You have been able to locate the following information on the firm: Total assets are $32.5 million, accounts receivable are $4.45 million, ACP is 25 days, net income is $4.00 million, and d..

In response to the financial crisis : In response to the financial crisis of 2007, the Federal Reserve has maintained near-zero interest rates for the past several years. The Fed has kept rates low due to slow economic and employment growth during the past few years. Suppose the Fed rais..

User Account

All Pages