What is the company cost of equity

Assignment Help Financial Management
Reference no: EM132019324

If Wild Widgets, Inc., were an all-equity company, it would have a beta of 1.15. The company has a target debt–equity ratio of .6. The expected return on the market portfolio is 10 percent, and Treasury bills currently yield 3.6 percent. The company has one bond issue outstanding that matures in 20 years and has a coupon rate of 8.2 percent. The bond currently sells for $1,140. The corporate tax rate is 35 percent. a. What is the company’s cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) % b. What is the company’s cost of equity? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Cost of equity % c. What is the company’s weighted average cost of capital? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) WACC %

Reference no: EM132019324

Questions Cloud

The interest rate on risky bond : Yield spreads are often calculated as the difference between the interest rate on a risky bond and the interest rate on:
What are the legal controversies surrounding them and why : Provide an overview of The United States Foreign Intelligence Surveillance Court.What are the legal controversies surrounding them and why?
Analyze the requirements needed for the application : A program is needed that acts as a BankAccount application. It should allow for the user to check their balance for Checking and Savings accounts.
Determine the value of the company equity : What is the total value of the company? Use the flow to equity approach to determine the value of the company’s equity.
What is the company cost of equity : What is the company’s weighted average cost of capital? What is the company’s cost of equity?
Closely related to the concept of the interest rate : Which of the following most closely related to the concept of “the interest rate?”
Enough on being socially responsible : Corporations are often criticized as focusing too much on profits and not enough on being socially responsible.
How much will betty stock be worth : How much will Betty’s stock be worth if she sells it five years from today?
What is this note macaulay duration : What is this note’s Macaulay Duration if the appropriate discount rate is 8%?

Reviews

Write a Review

Financial Management Questions & Answers

  What strategy should the beef producer follow

The standard deviation of monthly changes in the spot price of live cattle is (in cents per pound) 1.5. The standard deviation of monthly changes in the futures price of live cattle for the closest contract is 1.2. What strategy should the beef produ..

  Characterized by high fixed costs

The beer industry is characterized by high fixed costs. If a brewery is operating below capacity, this likely means that it can lower the average cost of the beer it is brewing. Which of the following reasons to 'go global' does this concept align wi..

  Assume the current exchange rate

Assume the current exchange rate is C$1 = $.85. How much will the payment two years from now be worth in U.S. dollars?

  Compute the amount that he must invest today

Newton Kris's plans to give her son $12500 when he is 21 which will be 5 years from now. if Newton finds an investment that will pay 8% compounded semiannually compute the amount that he must invest today to achieve his goal.

  Considering the purchase of two hummer limousines

Linda’s Luxury Travel (LLT) is considering the purchase of two Hummer limousines. Various information about the proposed investment follows:

  What is after-tax cost of debt

The Heuser Company's currently outstanding bonds have a 9% coupon and a 14% yield to maturity. Heuser believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 40%, what is Heuser's after-tax..

  Calculate the annual end-of-year loan payment

Calculate the annual, end-of-year loan payment. Explain why the interest portion of each payment declines with the passage of time.

  Discuss the growing aircraft leasing industry in china

What are the after-tax cash flows relevant to the purchase option and what discount rate should be used for those cash flows?

  How much does juan need to invest every 6 months to reach

Juan wants to have $45,000 available to make a down payment on a house at the end of 4 years.

  How can the farmer avoid the price risk

The price of wheat at the time of harvest in three months is uncertain. How can the farmer avoid the price risk?

  Determine the yield to investor

3 Today, the one-year U.S. interest rate is 2%, while the one-year interest rate in Mexico is 6%. The spot rate of the Mexico peso (MXP) is $.08 the one-year forward rate of the MXP exhibits a 11% discount. Determine the yield (percentage return on i..

  What is the companys forecasted growth using roe approach

If you also know currently the company has a price of $30, and you forecast the company to have a $1 earnings per share.

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