What is the company wacc

Assignment Help Accounting Basics
Reference no: EM132968628

Question - Lancaster Engineering Inc. (LEI) has the following capital structure, which is considered to be optimal:

Debt 40%

Preferred stock 10%

Common equity 50%

100%

The risk-free rate is 7%, the market risk premium is 6%, and LEI's beta is 1.2. The current price of the common stock is $50, its current dividend is $4.19, and they are expected to grow at 5% per year in the future. LEI's bonds earn a return of 10%, and the risk premium on its stock over its own bond is estimated as 4%. LEI's tax rate is 40%.

LEI can obtain new capital in the following ways:

Preferred stock: New preferred stock with a dividend of $10 can be sold to the public at a price of $111.10 per share.

Debt: Debt can be sold at an interest rate of 10 percent.

Required - What is the company's WACC?

Reference no: EM132968628

Questions Cloud

Calculate the plantwide predetermined overhead rate : Calculate the plantwide predetermined overhead rate using machine hours as the base. Provide a one-sentence description of how the rate will be used
What will be the estimated sganda costs the year : Thirty percent of SG&A costs are fixed costs. If its sales are expected to be $60,000 this year, what will be the estimated SG&A costs this year
What is the company times interest earned ratio : The company's sales are R8 1580 000, its tax rate is 40% and its net profit margin is 3,30%. What is the company's times interest earned ratio (TIE)
How old will be when the account has the target amount : How old will you be when the account has the target amount? You are 20 years old and plan to retire with $1,000,000. You have $27,500 available for investment.
What is the company wacc : Preferred stock: New preferred stock with a dividend of $10 can be sold to the public at a price of $111.10 per share. What is the company WACC
What wise compensation expense for stock options was : What Wise's compensation expense in 2021 for these stock options was? Wise Inc. developed a business strategy that uses stock options as a major compensation
Find e should recognize compensation expense of : An option pricing model estimated the value of the options at $8 each on the grant date. For 2021, E should recognize compensation expense of
What are three factors that affect good ethical conduct : What are three factors that might affect good ethical conduct? Discuss why confidentiality is an important ethical component of working in the accounting field.
Strategy plan to address issues : MANAGER OF THE FOLLOWING TEAM OUTLINED IN THE TASK BRIEFING - play the role of all parts in the report and take into consideration all the details

Reviews

Write a Review

Accounting Basics Questions & Answers

  Identify two situational pressures in a public company

Identify two situational pressures in a public company that would increase the likelihood of fraud.-  Identify three opportunity situations that would increase the likelihood of fraud.

  Which a liability shall be recognized

Which a liability shall be recognized? if the entity incurs a present obligation with improbable outflow of resources embodying economic benefits

  An example of a situation in which project management

Give an example of a situation in which project management is needed. ( Project created to retain more customers or initiative attract more customers)

  Wilson co purchased land as a factory site for 600000

wilson co. purchased land as a factory site for 600000. wilson paid 60000 to tear down two buildings on the land.

  How much of the capital loss may be deducted for the year

How much of the capital loss may be deducted for the year, and how much is carried back or forward if Goshawk is a proprietorship?

  Calculate jean ei premium for the pay period

During the current bi-weekly pay period, Jean worked 80 hours and received a bonus of $700. Calculate Jean's EI premium for this pay period.

  How would fabric used to make the comforters be classified

The company expects to make 2,000 comforters. With respect to the comforters how would the fabric used to make the comforters be classified

  How much are the carrying amounts of the interest receivable

On January 1, 20x1, ABC Co. acquired 10%, $100,000 bonds for $94,738. How much are the carrying amounts of the interest receivable on December

  Decision making and voting methods

Weighting and scoring (see Problem and Exercise 7-29) is only one method for comparing alternative solutions to a problem. Go to the library, find a book or articles on qualitative and quantitative decision making and voting methods

  Prerequisite for both academic and professional success

Understanding health care financial terms is a prerequisite for both academic and professional success. This assignment is intended to ensure you understand some of the basic terms used in this course.

  Justin holmes an ex-employee is entitled to a taxable

Justin Holmes, an ex-employee, is entitled to a taxable fringe benefit during the first part of this year. Because he wasn't paid any wages this year, can his employer report the taxable fringe benefit on Form 1099?

  Record the transactions in the cash receipts journal

Dec. 1 Received payment on account from Michael Anderson, $1,360. Record the transactions in the cash receipts journal

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