Targeted capital structure-marginal tax rate

Assignment Help Financial Management

Reference no: EM13947142

Brady Inc. has a targeted capital structure of 40% debt, 10% preferred stock, and 50% common stock. The marginal tax rate is 35%. Use the data below to calculate the companys WACC. Ignore flotation costs.

The S&P 500 is expected to be up 12% over the next year.

Brady's preferred stock that is being traded in the marketplace pays an annual dividend of $8.00.

Brady's common stock sells for $25.00 per share. The expected dividend on the common stock next year is $2.00 per share.

Brady's bonds sell at a discount. The ten year bonds are priced at 97% of par ($1000 par value). They are annual bonds with a 7% coupon rate.

Brady's preferred stock sells for $75 per share. Treasury bonds are priced to yield 4%.

Management feels its investors expect a 6% growth rate for the stock. The beta of the stock is 1.2.

Reference no: EM13947142

Questions Cloud

Highest real rate of return : A nominal return of 7% on your investment if you invest in US. A nominal return of 6% on you investment if you invest in Ireland. Which option will give you the highest real rate of return? (Calculate the average inflation for the last 5 years for ea..

Investment portfolio-contribute a fixed amount every year : Let’s assume you want to retire with $1,000,000 in your investment portfolio. Given that your investment timeline is 35 years, the return on investment is going to average 8% and you plan to contribute a fixed amount every year for 35 years. What wil..

What is the bond yield to maturity : Rierson owns a garment factory in Spain and sells designer clothes to US and other European countries. He is trying attract some investments from US that he can use to expand further into the US market. He decides to invest into ten year 1,000 EURO G..

What will be intrinsic price of microsoft stock ten years : Look up annual dividend of Microsoft (MSFT) on finance.yahoo.com. Assuming Microsoft dividend grows by 3% every year for 10 years and the discount rate is 6%. What is the intrinsic price of Microsoft today and is it more or less than the market price..

Targeted capital structure-marginal tax rate : Brady Inc. has a targeted capital structure of 40% debt, 10% preferred stock, and 50% common stock. The marginal tax rate is 35%. Use the data below to calculate the companys WACC. Ignore flotation costs.

What will the present value of his portfolio : Elliot makes $250,000 a year and pays 30% taxes on $150,000 and 35% on his remaining salary. His expenses are $110,000 (per year). He wants to invest a fixed amount EVERY day into an investment fund for 5 years and he hopes to get a 12% return. What ..

Calculate the number of shares issued through this ipo : Hughes Technology Corp. recently went public with an initial public offering in which it received a total of $75.28 million in new capital funding. The underwriter used a firm commitment offering in which the offer price was $21.05 and the underwrite..

A law firm uses activity-based pricing : A law firm uses activity-based pricing. The company’s activity pools are as follows: Cost Pool Annual Estimated Cost Cost Driver Annual Driver Quantity Consultation 197,000 Number of consultations 100 consultations Administrative Costs 130,000 Admin ..

Activity based pricing marks up the direct cost of goods : A company using activity based pricing marks up the direct cost of goods by 0.28 plus charges customers for indirect costs based on the activities utilized by the customer. Indirect costs are charged as follows: $7.60 per order placed; $2.30. per sep..

User Account

All Pages