What is acort equity cost of capital

Assignment Help Financial Management
Reference no: EM131530257

Acort Industries has 12 million shares outstanding and a current share price of $36 per share. It also has long-term debt outstanding. This debt is risk free, is four years away from maturity, has an annual coupon rate of 7%, and has a $101million face value. The first of the remaining coupon payments will be due in exactly one year. The riskless interest rates for all maturities are constant at 4.2%.Acort has EBIT of $103million, which is expected to remain constant each year. New capital expenditures are expected to equal depreciation and equal $20million per year, while no changes to net working capital are expected in the future. The corporate tax rate is 35%,and Acort is expected to keep its debt-equity ratio constant in the future (by either issuing additional new debt or buying back some debt as time goes on).

a. Based on this information, estimate Acort's WACC.

b. What is Acort's equity cost of capital?

Reference no: EM131530257

Questions Cloud

Find the wacc and unlevered cost of capital for synergies : Assuming that synergies in the merger have the same risk as that of Wyeth’s cash flows, find the WACC and the unlevered cost of capital for the synergies.
What is the break-even salvage value us dollars : Petrus Company has unique opportunity to invest in a two-year project in Australia. What is the break-even salvage value US dollars?
Additional provisions for commercial mortgages : What are these additional provisions for commercial mortgages?
Opportunity to buy the stock of cool tech : Today is 2015. Assume that you have an opportunity to buy the stock of Cool Tech, Inc., an IPO being offered for $12.50 per share.
What is acort equity cost of capital : Acort Industries has 12 million shares outstanding and a current share price of $36 per share. What is Acort's equity cost of capital?
Sold at the end of the fifth year of ownership : The building has a CCA rate of 4% and will be sold at the end of the fifth year of ownership."
Compute npv-irr and dpb for both projects : Calculate the cross over rate. Compute NPV, IRR, and DPB for both projects.
Value of the project-including the tax shield of the debt : What is the value of the project, including the tax shield of the debt?
What is target stock price in one year : Earnings are expected to grow at 7% per year. What is the target stock price in one year?

Reviews

Write a Review

Financial Management Questions & Answers

  Foreign company acquisition

Acquisition by a foreign company and the effects of that decision and the results of foreign exchange in Euro and the exchange rate differences.

  Financial management for profit and non profit organizations

In this essay, we are going to discuss the issues of financial management in a non-profit organisation.

  Method for estimating a venture''s value

Evaluate venture's present value, cash and surplus cash and basic venture capital.

  Replacement analysis

This document show the Replacement Analysis of modling machine. Is replacement give profit to company or not?

  Business finance task - capital budgeting

Your company is considering using the payback period for capital-budgeting. Discuss the advantages and disadvantages of this technique.

  Analysis of the investment

In this project, you will focus on one of these: the additional cost resulting from the purchase of an apple press (a piece of equipment required to manufacture apple juice).

  Conduct a what-if analysis

Review the readings and media for this unit, including the Anthony's Orchard case study media. Familiarise yourself with the Anthony's Orchard company and its current situation.

  Determine operational expenditures

Organisations' behaviour is guided by financial data. In the short term, such data will help determine operational expenditures; in the long term, historical data may help generate forecasts aimed at determining strategic plans. In both instances.

  Personal financial management

How much will you have left over each half year if you adopt the latter course of action?

  Sources of finance for expansion into new foreign markets

A quoted company is considering several long-term sources of finance for expansion into new foreign markets.

  Long term financial planning

This assignment is designed for analyze Long term financial planning begins with the sales forecast and the key input in the long term fincial planning.

  Explain the role of fincial manager

This assignment explain the role of fincial manager, function of manger. And what are the motives of financial manager.

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