How do calculate the weighted average cost of capital

Assignment Help Financial Accounting
Reference no: EM132912814

Problem 1: A year ago a company issued a bond with a 12-year maturity, with a coupon rate of 8%, currently the bond is selling at 97 dollars, the company has a tax rate on profits of 26%. The company has a target D / E of 1.9, a risk premium for the cost of equity of 5%. Calculate the weighted average cost of capital.

Reference no: EM132912814

Questions Cloud

Describe a capital budgeting decision for a small bakery : Describe a capital budgeting decision for a small bakery. Explain it and justify why is a capital budgeting decision. please answer in detail asap.
Determine yearly payment john has to make in order to have : Mary just turned 20 years old and intends to invest $5,500. Determine the yearly payment John has to make in order to have the same present value as Mary.
How much going to have in the bank : XYZ bank which offers you the equivalent of 0.5% per month in interest how much you are going to have in the bank considering both principal and interest?
How does academic dishonesty undermine : How does academic dishonesty undermine the purpose of obtaining an education?
How do calculate the weighted average cost of capital : The company has a target D / E of 1.9, a risk premium for the cost of equity of 5%. Calculate the weighted average cost of capital.
What is concept-based curriculum : What is concept-based curriculum and how does it differ from skill-based or fact-based curriculum?
What are the benefits of the corporation : What are the benefits of the corporation in comparison with the partnership and proprietorship structures? How is equity treated and reported differently
Determine what is the project npv : A project has an initial cost of $55,000, expected net cash inflows of $14,000 per year for 6 years, and a cost of capital of 12%. What is the project's NPV?
Neo-piagetians theories of cognitive development : Analyze ONE of the Neo-Piagetians' theories of cognitive development

Reviews

Write a Review

Financial Accounting Questions & Answers

  What is the companys operating cash flow

During 2014, Raines Umbrella Corp. had sales of $730,000. Cost of goods sold, administrative and selling expenses, and depreciation expenses were $450,000, $90,000, and $160,000, respectively. In addition, the company had an interest expense of $92,0..

  While mary corens was a student at the university

While Mary Corens was a student at the University of Tennessee, she borrowed $12,000 in student loans at an annual interest rate of 9.10%.

  Determine the firm generates sales

Western Wear has net working capital of $5,200, net fixed assets of $128,000, sales of $114,000, Determine the firm generates sales

  Determine if this business venture should be undertaken

A compant is considering investing $350,000 in surface land rights and $600,000 in a steel warehouse building with both costs incurred at time zero. Manufacturing equipment costing $400,000 would be installed at time zero to generate carwash units to..

  Why manufacturing companies are more sensitive

Examine the main reasons why manufacturing companies are more sensitive to material price variances, as compared to labor variances

  Balance sheet under the ifrs revaluation model

A company acquired a new piece of equipment on January 1, 2011 at a cost of $200,000. The equipment is expected to have a useful life of 10 years, a residual value of $20,000 and is depreciated on a straight-line basis. At what amount should the equi..

  What is the npv of the replacement project

What is the NPV of the replacement project? What is the PV CCA Tax Shield? What is the last year's cash flow (excluding the CCA Tax Shield)?

  What is the donees basis for purposes of determining loss

Donor made a gift of property to donee. If the donee sells the property for $75,000, What is the donee's basis for purposes of determining loss is equal to

  Operations reported on variable costing income statement

A business operated at 100% of capacity during its first month and incurred the following costs: Production costs (10,000 units): Direct materials $140,000 Direct labor 40,000 Variable factory overhead 20,000 Fixed factory overhead 4,000 $204,000 Ope..

  Compute return on common stockholders equity for year two

Lundberg Corporation's most recent balance sheet and income statement appear below: Statement of Financial Position December 31, Year 2 and Year 1 (in thousands of dollars) Year 2 Year 1 Asset: Current assets: Cash $ 130 $ 140 Accounts receivable 240..

  Why is important to differentiate between the depreciation

Why is it important to differentiate between the depreciation that is reported to shareholders in financial statements and the depreciation

  Demonstrate effect of wrong entry on the financial position

Assume that you are starting a new business on 1st Jan 2021. Demonstrate the effect of wrong entries on the financial position of a business organisation.

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