Determine what is the difference between the two waccs

Assignment Help Financial Econometrics

Reference no: EM13334888

Sapp Trucking's balance sheet shows a total of noncallable $45 million long-term debt with a coupon rate of 7.00% and a yield to maturity of 6.00%. This debt currently has a market value of $50 million. The balance sheet also shows that the company has 10 million shares of common stock, and the book value of the common equity (common stock plus retained earnings) is $65 million. The current stock price is $16.50 per share; stockholders' required return, rs, is 14.00%; and the firm's tax rate is 40%. The CFO thinks the WACC should be based on market value weights, but the president thinks book weights are more appropriate. What is the difference between these two WACCs?

Reference no: EM13334888

Questions Cloud

What is the initial cash flow and the terminal cash flow : Over the past year, Home Furnsihing Express has spent $17 studying the market for the new project. The accountants estimate that store overhead will increase due to the addition of the new back office personnel.

Write a memo to the department heads of pegasus : Write a memo to the department heads of Pegasus to describe the goals of the change initiative,

Explain heptane water solubility and dilute hcl : You have samples of two different compounds, CH3(CH2)3C(CH3)2OH and CH3(CH2)6OH. Which one of these tests can be used to distinguish between the pair of compounds shown above? 1. Br2 in CH3CCl3 2. NaHCO3 solution 3. heptane/water solubility 4. dil..

Advantages of large number of simultaneous tcp connections : Can you configure your browser to open multiple simultaneous connections to a Web site? What are the advantages and disadvantages of having large number of simultaneous TCP connections?

Determine what is the difference between the two waccs : Sapp Trucking's balance sheet shows a total of noncallable $45 million long-term debt with a coupon rate of 7.00% and a yield to maturity of 6.00%. This debt currently has a market value of $50 million.

Determine the radius of its path in the magnetic field : An electron is accelerated from rest by a potential difference of 440 V. It then enters a uniform magnetic field of magnitude 220 mT with its velocity perpendicular to the field. Calculate the radius of its path in the magnetic field

What data collection programs would be best utilized : Draft of a Red Cell Analysis putting yourself in the shoes of a member of Los Zetas. What data collection programs would be best utilized on the organization? Which members of the IC would be the best collectors of intelligence on Los Zetas? What int..

Determine the frequency of circling : An electron with kinetic energy 1.56 keV circles in a plane perpendicular to a uniform magnetic field. The orbit radius is 23.0 cm. Find the frequency of circling

What will be the composition of the optimal portfolio : Suppose a risk averse investor can choose a portfolio consisting of 2 assets with independently distributed returns, both of which have identical means (r1=r2) and identical variances.

User Account

All Pages