Calculate the total current value of the debt

Assignment Help Financial Management

Reference no: EM132048359

Starlight Foods went public by issuing 1 million shares of common stock @ $25 per share. The shares are currently trading at $30 per share. Current risk free rate is 4%, market risk premium is 8% and the company has a beta coefficient of 1.2.

During last year, it issued 50,000 bonds of $1,000 par (FV) paying 10% coupon annually maturing in 20 years. The bonds are currently trading (PV)) at $950.

The tax rate is 30%. Calculate the weighted average cost of capital.

Answer the following questions:

1) Calculate the total current Value of the Equity

2) Calculate the total current Value of the debt

3) Calculate the current value of the total capital for the firm

4) Calculate the weight of Equity in the capital structure

5) Calculate the weight of Debt in the capital structure.

6) Estimate the cost of debt by calculating the Yield to maturity

7) Estimate the cost of equity by the CAPM model.

8) Finally estimate the Weighted Average Cost of Capital (WACC) for the firm.

Reference no: EM132048359

Questions Cloud

Use the put-call parity condition to find put option premium : Find the call option premium. Use the put-call parity condition to find a put option premium.

Compute the materials price variance : PURE Inc. produces flavored waters, sold in gallons. Compute the materials price variance indicating if it is favorable or unfavorable

Biosynthesis of purines and pyrimidinesis : Serine, and amino acid is used in the biosynthesis of purines and pyrimidinesis. Its formula is C3H7NO3. How to find the formula weight in amu of Serina?

Calculate the molal mass of glucose : The resulting solution was found to have a boiling point of 100.34 °C. The molal boiling point elevation constant for water is 0.51 °Ckg/mol.

Calculate the total current value of the debt : Calculate the total current Value of the Equity. Calculate the total current Value of the debt.

What is the new volume 2 : If the temperature changes to 86°C, and there is no change of pressure or amount of gas, what is the new volume 2, of the gas?

Should the motel be built : Value Lodges owns an economy motel chain and is considering building a new 200-unit motel. The cost to build the motel is estimated at $3,220,000;

What it means to be soluble : What it means to be "soluble"--why some ionic compounds precipitate and others do not.

What are the positives and negatives for proceeding : What are the positives and negatives for proceeding with the buyout and the positives and negatives for not proceeding with the buyout?

User Account

All Pages