Equity portion of financing is from retained earnings

Assignment Help Operation Management

Reference no: EM131783277

Delta, Inc. has a stock price of $50. In the fiscal year just ended, dividends were $2.00. Earnings per share and dividends are expected to increase at an annual rate of 8 percent. The risk-free rate is 4 percent, the market risk premium is 6.4 percent and the beta on Delta’s stock is 1.25. Delta’s target capital structure is 40% debt and 60% common equity. Delta’s tax rate is 40 percent. New common stock can be sold to net $40 per share after flotation costs. Delta can sell bonds that mature in 25 years with a par value of $1,000 and an 8% coupon rate paid annually for $960. Calculate the WACC if equity portion of financing is from retained earnings.

Reference no: EM131783277

Questions Cloud

What would be the balance in the common stock account : What would be the balance in the Common Stock account after the issuance of a 10% stock dividend?

What is the beta of your portfolio : You own $6,384 of Olympic Steel stock that has a beta of 2.98. You also own $12,768 of Rent-a-Center (beta= 1.47) and $1444. What is the beta of your portfolio?

Record necessary journal entries assuming a small : declares a stock dividend on its 10,000, $1 par, common shares. The market price of the common stock is $30 on this date

What are the five variables in present value problems : What are the five variables in present value problems? What Excel functions are used in the Hi-Lo method of predicting costs?

Equity portion of financing is from retained earnings : Calculate the WACC if equity portion of financing is from retained earnings.

How many kanban cards are needed : The lead time is 30 minutes and a container accommodates 80 bottles. The safety stock is 30 percent of expected demand. How many kanban cards are needed?

Degrees of truth in feedback : Jack and Rachel have been carpooling for about a year. She asks Jack “do you see me as supervisor material?

Briefly describe the concept of status : Describe the global implications that status has for an international manager in Western culture, with two (2) original examples.

Summarise the given paragraphs in one sentence : There are 41 main paragraphs which need to be summarised in one sentence. During the time of the Aztecs, cocoa was mainly used as a beverage

User Account

All Pages