What is cost of equity capital and wacc

Assignment Help Financial Management

Reference no: EM131552315

The common stock of Buildwell Conservation & Construction Inc. (BCCI) has a beta of .9. The Treasury bill rate is 4%, and the market risk premium is estimated at 7%. BCCI’s capital structure is 37% debt, paying an interest rate of 6%, and 63% equity. The debt sells at par. Buildwell pays tax at 40%.

a. What is BCCI’s cost of equity capital? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)

Cost of equity capital= ______ %

b. What is its WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

WACC= ____ %

c. If BCCI is presented with a project with an internal rate of return of 10%, should it accept the project if it has the same level of risk as the current firm?

Yes or No

Reference no: EM131552315

Questions Cloud

Compute the npv of this alternative : An alternative requires $13000 to be paid at the end of year 1, year 2, and year 3. All values are in constant dollars. compute the NPV of this alternative.

The seller of forward contract agrees : When a firm hedges a risk it: The term "derivatives" refers to: The seller of a forward contract agrees to:

What investment would be a hedge for a corn farmer : What investment would be a hedge for a corn farmer? Hedging contracts on a futures exchange eliminates: The seller of a forward contract agrees to:

Depreciation tax shield is as risky as the project assets : Crimson inc. is planning to expand its operations in the fish-farming industry. The depreciation tax shield is as risky as the project’s assets.

What is cost of equity capital and wacc : What is BCCI’s cost of equity capital? What is its WACC?

Calculate change on net worth of the same bank : Calculate change on net worth of the same bank with .25% change in interest rate if the base rate was 6%

Your mortgage be considered conforming or non-conforming : Would your mortgage be considered conforming or non-conforming? Do you think you’ll be required to obtain private mortgage insurance? Why?

Finance manager work to ensure proper financial controls : With what players in an organization does the finance manager work to ensure proper financial controls are in place?

What is the amount of the company accounts receivable : What is the amount of the company’s accounts receivable? Will this change in policy increase or decrease accounts receivable?

User Account

All Pages