The capital structure for the firm will be maintained and

Reference no: EM13395338

Coogly Company is attempting to identify its weighted average cost of capital for the coming year and has hired you to answer some questions they have about the process. They have asked you to present this information in a PowerPoint presentation to the company’s management team.The company would like for you to keep your presentation to approximately 10 slides and use the notes section in PowerPoint to clarify your point. Your presentation should address the following questions and offer a final recommendation to Coogly. Make sure you support your answers and clearly explain the advantages and disadvantages of utilizing the weighted average cost of capital methodology. Include at least one graph or chart in your presentation.

Company Information

The capital structure for the firm will be maintained and is now 10% preferred stock, 30% debt, and 60% new common stock. No retained earnings are available. The marginal tax rate for the firm is 40%.

Coogly has outstanding preferred stock That pays a dividend of $4 per share and sells for $82 per share, with a floatation cost of $6 per share. What is the component cost for Coogly’s preferred stock? What are the advantages and disadvantages of using preferred stock in the capital structure?

If the company issues new common stock, it will sell for $50 per share with a floatation cost of $9 per share. The last dividend paid was $3.80 and this dividend is expected to grow at a rate of 7% for the foreseeable future. What is the cost of new equity to the firm? What are the advantages and disadvantages of issuing new equity in the capital structure?

The company will use new bonds for any capital project, according to the capital structure. These bonds will have a market and par value of $1000, with a coupon rate of 6% and a floatation cost of 7%. The bonds will mature in 20 years and no other debt will be used for any new investments. What is the cost of new debt? What are the advantages and disadvantages of issuing new debt in the capital structure?

Given the component costs identified above and the capital structure for the firm, what is the weighted average cost of capital for Coogly? What are the advantages and disadvantages of using this method in the capital budgeting process?

Reference no: EM13395338

Questions Cloud

In this discussion board assignment you will look at the : deliverable length 5-6 paragraphswhen you look around at the world you can see many examples that demonstrate how an

A business has analysed its cash flow forecast for the : a business has analysed its cash flow forecast for the year which has shown that there will be a shortfall in june

What steps if any must be taken to give assistance for : what steps if any should be taken to provide assistance for funding and financing energy efficiency and renewable

Select a purchase you have made recently and describe in : write a 700- to 1050-word paper in which you relate consumer behavior to marketing. in your paper address the

The capital structure for the firm will be maintained and : coogly company is attempting to identify its weighted average cost of capital for the coming year and has hired you to

When faced with the temptation to break a contract we are : 1. who was the moral philosopher who wrote the theory of moral sentiments as well as the wealth of nations?a. john

The mathematical expression of probability as a number : the mathematical expression of probability as a number between 0 and 1 is fundamental to understanding statistics. for

Sketch and properly label demand and supply graphs this : based on the information provided for the market for video games answer the following questions.priceq demandedq

Write down a 1400- to 1750-word paper evaluating the : write a 1400- to 1750-word paper assessing the ecological property you chose for your final paper. identify the

User Account

All Pages