What is millennium wacc

Assignment Help Finance Basics
Reference no: EM133069170

The target capital structure for Millennium Corporation is 50 percent common stock, 5 percent preferred stock, and 45 percent debt. Its cost of equity is 15 percent, the cost of preferred stock is 6 percent, and the cost of debt is 8 percent. The relevant tax rate is 35 percent.

a) What is Millennium's WACC?

b) The company president has approached you about its capital structure. He wants to know why the company doesn't use more preferred stock ?nancing because it costs less than debt. What would you tell the president?

Reference no: EM133069170

Questions Cloud

What is the npv of the project of tech mfg : Tech Mfg. is thinking about replacing an existing drill press. The existing press was purchased 2 years ago for $78,000 with a salvage value of $9,000.
Why do consumers become overextended : 1) Why is it a good idea for consumers to pay more than their minimum balances on open-end credit accounts?
Find value of the patent and copyright in consolidation : A and Z are entering into a stock for stock transaction in which A acquires 100% of Z's stock. Prior to the transaction, A has 1,000 share outstanding.
Develop an overall forecast : Assume that Bangladesh invests heavily in government and corporate securities of India. In addition, residents of India invest heavily in Bangladesh.
What is millennium wacc : The target capital structure for Millennium Corporation is 50 percent common stock, 5 percent preferred stock, and 45 percent debt.
Explain the relationships between financial values : Explain the relationships among financial values, goals and strategies. Write down as many things as you can think of would give you the most joy out of the fin
Total direct spending of incremental visitors : What was the total direct spending of incremental visitors due to the Arizona Super Bowl?
How unequal payments affect risk : Use linear approximation (Taylor formula) to estimate new prices of each loan at time k = 0 is the interest rate becomes iyear = 4%.
Explain the lending rate and the ask price : Assume the bid price for interest rates is the lending rate and the ask price is the borrowing rate. Does an arbitrage opportunity exist

Reviews

Write a Review

Finance Basics Questions & Answers

  What is meant by overhead

What is meant by overhead? What are some examples of overhead costs in the healthcare industry?

  Examples of at least four derivative securities

Discuss and provide examples of at least four derivative securities. Be sure to include the pros and cons of each one.

  What is present value of investment

An investment will pay $50 at the end of each of the next 3 years, $200 at the end of Year 4, $300 at the end of Year 5, and $500 at the end of Year 6.

  Why a company would repurchase its outstanding debt

Explain how this repurchase would affect (increase, decrease, or have no effect on) the components of the accounting equation: assets, liabilities, shareholders' equity. Would a gain or loss be recognized on the transaction?

  What is the effective annual cost of trade credit if you

Your supplier offers terms of 1/10, Net 45. What is the effective annual cost of trade credit if you choose to forgo the discount and pay on day 45?

  What effective annual rate does the bank pay

If a bank pays a 4,50% nominal rate with monthly compounding on deposits, what effective annual rate does the bank pay?

  Have your spreadsheet be fully functional

Have your spreadsheet be fully functional? Have each worksheet be clearly labeled to identify the associated problem.

  Determine the beta of the firm

An investor has $5,000 invested in a stock which has an estimated beta of 1.2, and another $15,000 invested in stock of the firm for which he works. The risk free rate is 6% and the market risk premium is also 6%.

  What is the amount of the last dividend company paid

My Inc. has a dividend growth rate of 6 percent, a market price of $16 a share, and a required return of 16 percent. What is the amount of the last dividend.

  What is the company wacc

Assume that the overall cost of debt is the weighted average of that implied by the two outstanding debt issues. Both bonds make semiannual payments.

  Determine the profit equations for this position

Determine the profit equations for this position, and identify the breakeven stock price at expiration and maximum and minimum profits ? Explain the advantages and disadvantages to a covered call writer of closing out the position prior to expirat..

  Derive the minimum-variance portfolio

Derive the minimum-variance portfolio for a 12% expected return and:

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