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The Pawlson Company's year-end balance sheet is shown below. Its cost of common equity is 15%, its before-tax cost of debt is 9%, and its marginal tax rate is 40%. Assume that the firm's long-term debt sells at par value. The firm’s total debt, which is the sum of the company’s short-term debt and long-term debt, equals $1,200. The firm has 576 shares of common stock outstanding that sell for $4.00 per share. Assets Liabilities And Equity Cash $ 120 Accounts payable and accruals $ 10 Accounts receivable 240 Short-term debt 60 Inventories 360 Long-term debt 1,140 Plant and equipment, net 2,160 Common equity 1,670 Total assets $2,880 Total liabilities and equity $2,880 Calculate Pawlson's WACC using market-value weights. Round your answer to two decimal places. Do not round your intermediate calculations. %
The school board also discusses how to invest some of its reserves. They want to invest 2.5 million dollars in a mixture of 2 types of bond funds: a corporate bond fund paying 5% interest per year, and a municipal bond fund paying 6% interest per yea..
Luke Coal Mining, Inc. is considering opening a strip mine, the cost of which is $4.4 million. Cash flows will be $27.7 million, all coming at the end of one year. The land must be returned to its natural state at a cost of $25 million, payable after..
Identify whether you should use an average cost of bank funds or a marginal cost of funds in the following situations. a. Setting the rate on a new loan b. Evaluating the profitability of a long standing customer's relationship c. Calculating the ban..
You just inherited $1,000,000. Instead of taking a lump sum, a financial planner has suggested two additional options. First, you invest in an annuity that will pay you $125,000 per year for 10 years. The discount rate is 8% for both options. The sec..
The Mini-Max Company has a new prospective 5-year project with an initial cost of $318,900, annual fixed costs of $45,200, variable costs per unit of $16.78, and a sales price of $29.95. The discount rate is 13 percent and the tax rate is 35 percent...
The corporate tax rate is 32%. What would be the approximate after-tax cost of debt for a new issue of bonds?
In order to fund her retirement, Michele requires a portfolio with an expected return of 0.10 per year over the next 30 years. She has decided to invest in Stocks 1, 2, and 3, with 25 percent in Stock 1, 50 percent in Stock 2, and 25 percent in Stock..
What is the amount of her monthly payment on the loan if she must pay 6% annual intrest on a 36-month car loan?
What are the two primary ways companies raise common equity? Why is there a cost associated with reinvested earnings?
How much would his expected average salary (to the nearest dollar) have to be over the next five years to keep him working?
A company is considering a 5-year project that opens a new product line and requires an initial outlay of $78,000. The assumed selling price is $93 per unit, and the variable cost is $66 per unit. Fixed costs not including depreciation are $16,000 pe..
What is the firm's standard deviation? What is the firm's coefficient of variation?
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