Determining the company wacc

Reference no: EM131007041

A company issues 15-year, $1,000 par-value bonds, with a coupon rate of 5%. The bonds are sold for $619.70. The tax rate is 30%. Compute the cost of debt before taxes and after taxes. 2. Suppose a company issues common stock to the public for $25 a share. The expected dividend is $2.50 per share and the growth in dividends is 8%. If the flotation cost is 10% of the issue proceeds, compute the cost of external equity, re. 5. Suppose you are informed that a company expects to pay a $2.50 dividend at year end (D1 = $2.50), the dividend is expected to grow at a constant rate of 5.50% a year, and the common stock currently sells for $52.50 a share. The before-tax cost of debt is 7.50%, and the tax rate is 40%. The target capital structure consists of 45% debt and 55% common equity. What is the company's WACC if all the equity used is from retained earnings?

Reference no: EM131007041

Questions Cloud

Different purchasing discounts : The Artist's Palette purchases its inventory from a number of suppliers and each supplier offers different purchasing discounts. The manager of The Artist's Palette, Marty Parma, is currently comparing two offers for purchasing modeling clay and ..

Maximize shareholder wealth : Langston Labs has an overall (composite) WACC of 10%, which reflects the cost of capital for its average asset. Its assets vary widely in risk, and Langston evaluates low-risk projects with a WACC of 8%, average-risk projects at 10%, and high-risk..

Problem regarding the average risk projects : Suppose Tapley Inc. uses a WACC of 8% for below-average risk projects, 10% for average-risk projects, and 12% for above-average risk projects. Project A has average risk and an IRR of 9%.

Find the rate of change of the distance between two vehicles : At the instant when the truck is 30 meters from the intersection and the car is 40 meters past the intersection, find the rate of change of the distance between the two vehicles. Are they getting further apart or closer together?

Determining the company wacc : The before-tax cost of debt is 7.50%, and the tax rate is 40%. The target capital structure consists of 45% debt and 55% common equity. What is the company's WACC if all the equity used is from retained earnings?

Give the absolute maxima and minima : Give all relative maxima and minima and when they occur on the interval. Give the absolute maxima and minima and when they occur on the interval. Interpret your results.

Problem regarding the sec enforcement action : The following assignment is for an advanced auditing class.The textbook used for this class is"Auditing: A risk-based approach to conducting a quality audit" (9th Ed.) by Johnston, Gramling, & Rittenberg. The assignment description is as follows:

Topaz financed the purchase with a bank loan : On January 1, 2014, Topaz Corp. purchased a piece of equipment with a list price of $60,000. The following amounts were related to the equipment purchase:

Nontaxable return of capital : On the last day of Year 3 Candy Corp. makes a $12,500 cash shareholder distribution, distributed equally among its two shareholders, Goode and Plenteau. How much of Goode's distribution is a nontaxable return of capital? Assume sufficient basis in..

User Account

All Pages