Reference no: EM13953732
Given the following information, calculate the weighted average cost of capital for Digital Processing Inc. Line up the calculations in the order shown in Table 11-1.
Percent of capital structure:
Preferred stock................ 20%
Common equity............... 40
Debt................................. 40
Additional information:
Corporate tax rate............................. 34%
Dividend, preferred........................... $8.50
Dividend, expected common............. $2.50
Dividend, preferred........................... $105.00
Growth rate....................................... 7%
Bond yield.......................................... 9.5
Flotation cost, preferred.................... $3.60
Price, common................................... $75.00
|
What is the advantage of using forward contracts
: Suppose that you are a financial manager of a company that exports mainly to England. You expect to receive a huge payment in British pounds from your customer in a couple of months. To avoid the potential adverse move of British pound, you have deci..
|
|
An increase in the discount rate of a stock
: Other things held constant, an increase in the discount rate of a stock will result in an increase in its price. Other things held constant, a decrease in the cost of capital will result in an increase in a project's payback period.
|
|
What is the cost of preferred stock-cost of common stock
: Given the following information for XYZ Co., you want to find the cost of capital (WACC). The firm’s tax rate is 40%. Ignore all the flotation cost. Debt: 8,000 7% coupon bonds outstanding, $1,000 par value, 15 years to maturity, selling for 98% of p..
|
|
What is annualized cost of forgoing discount
: If a firm buys on trade credit terms of 3/10, net 50 and decides to forgo the trade credit discount and pay on the net day, what is annualized cost of forgoing the discount (assume a 360-day year)?
|
|
Calculate the weighted average cost of capital
: Given the following information, calculate the weighted average cost of capital for Digital Processing Inc. Line up the calculations in the order shown in Table 11-1.
|
|
The stock price to remain unchanged
: Teardrop, Inc. wishes to expand its facilities. The company currently has 8 million shares outstanding and no debt. The stock sells for $65 per share, but the book value per share is $20. What would the new net income for Teardrop have to be for the ..
|
|
What is the actual cost of the acquisition
: Firm X is being acquired by Firm Y for $35,000 worth of Firm Y stock. The incremental value of the acquisition is $2,500. Firm X has 2,000 shares of stock outstanding at a price of $16 a share. Firm Y has 1,200 shares of stock outstanding at a price ..
|
|
Rate of return is applicable to this potential purchase
: Marko, Inc. is considering the purchase of ABC Co. Marko believes that ABC Co. can generate cash flows of $5,000, $9,000, and $15,000 over the next three years, respectively. After that time, Marko feels ABC will be worthless. Marko has determined th..
|
|
Estimate the value of general communications
: You have been asked to estimate the value of General Communications, a telecomm firm. General Communications has a debt to capital ratio of 30%, a beta of 1.10 and a pre-tax cost of debt of 7.5%. Assuming that the firm is in stable growth, and that t..
|