Calculate wacc using market-value weights

Assignment Help Financial Management
Reference no: EM132019208

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. %

Reference no: EM132019208

Questions Cloud

The required rates of return on individual securities : The security market line is equation that shows the relationship between risk as measured by beta and the required rates of return on individual securities.
Discuss how that section of the constitution relates to any : Discuss how this section of the Constitution or its amendments both limit and protect business in general.
Calculate the bond macaulay duration : Calculate the bond’s Macaulay duration? Calculate the bond’s modified duration
What is your understanding of nursing as emerging profession : What is your understanding of nursing as an emerging profession, and how does this understanding relate to the development of the advanced practice nursing.
Calculate wacc using market-value weights : Calculate Pawlson's WACC using market-value weights.
Define evolution of specific advanced nursing practice roles : Why is it important to understand the history of the evolution of specific advanced nursing practice roles? What difference does this history make to you.
The initial investment to fund an acquisition : An additional equity investment by the sponsor that is planned to be made after the initial investment to fund an acquisition by the LBO target company
What are the possible causes of the pain : A 12-year-old female is admitted with severe pain in her spine. While checking history, the patient and her mother state that several weeks ago the patient.
What is the cash break-even point : Night Shades Inc. (NSI) manufactures biotech sunglasses. what is the cash break-even point?

Reviews

Write a Review

Financial Management Questions & Answers

  How much money should be invested in corporate bond fund

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..

  Project be accepted if required rate of return

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 fund

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..

  Financial planner has suggested two additional options

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..

  What is the accounting break-even point in units per year

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...

  Approximate after-tax cost of debt for new issue of bonds

The corporate tax rate is 32%. What would be the approximate after-tax cost of debt for a new issue of bonds?

  Enable michele to achieve her investment requirement

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

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

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

How much would his expected average salary (to the nearest dollar) have to be over the next five years to keep him working?

  New product line and requires an initial outlay

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 coefficient of variation

What is the firm's standard deviation? What is the firm's coefficient of variation?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd