What is acort equity cost of capital

Assignment Help Financial Management

Reference no: EM131818218

Acort Industries has 15 million shares outstanding and a current share price of $ 37 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 $94 million 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 $109 million, which is expected to remain constant each year. New capital expenditures are expected to equal depreciation and equal $ 16 million per year, while no changes to net working capital are expected in the future. The corporate tax rate is 45 %, 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: EM131818218

Questions Cloud

Relationship between two quantitative variables : Find a newspaper article or Internet report about a study that looks at the relationship between two quantitative variables for a larger population

Calculate Red DPAD for the current year : Last year, Red had an NOL of $800,000, which Red elected to carry forward. Calculate Red's DPAD for the current year

Describe the two quantitative variables of interest : Describe the two quantitative variables of interest, and tell which is explanatory and which is response.

How might these conditions affect others with mental illness : Considering Ruby Wax in particular, how might have labeling, stigmatization, or comorbidity affected her own struggle with clinical depression?

What is acort equity cost of capital : Acort Industries has 15 million shares outstanding and a current share price of $ 37 per share.What is Acort's equity cost of capital?

Discuss process-assembly department for may : The debits to Work in Process-Assembly Department for May, together with data concerning production

Determine the study of abnormal psychology : What is the title of the article? Provide the reference for the article in proper APA format.What is the purpose of the article?

Calculate the DPAD for Rose : In 2011, Rose, Inc. has QPAI of $4 million and taxable income of $3 million. Calculate the DPAD for Rose, Inc., for 2011

Discuss the beginning of production and that the first-in : Assuming that all direct materials are placed in process at the beginning of production and that the first-in, first-out method of inventory costing is used

User Account

All Pages