What is the firm pretax cost of debt

Assignment Help Financial Management
Reference no: EM132045955

1. BlockOut Co. has 76,622 bonds outstanding that are selling at par value. The bonds yield 8.1 percent. The company also has 5.4 million shares of common stock outstanding. The stock has a beta of 1.16 and sells for $40.6 a share. The U.S. Treasury bill is yielding 4.8 percent and the market risk premium is 7.3 percent. Blackout's tax rate is 39 percent. What is the firm's weighted average cost of capital? (Enter answer in percents.)

2. GIMP Inc. is trying to determine its cost of debt. The firm has a debt issue outstanding with 2 years to maturity that is quoted at 101.6 percent of face value. The issue makes annual payments and has an embedded cost (coupon rate) of 9.3 percent annually. What is the firm's pretax cost of debt? (Enter answer in percents.)

3. Information on Inkscape Co. is shown below. Assume the company's tax rate is 38 percent. The firm has no debt. Common stock: 203,996 shares outstanding, selling for $95.8 per share; beta is 1.11. Preferred stock: 24,379 shares of 4.8 percent preferred stock outstanding, currently selling for $84.8 per share. Market: 8.95 percent market risk premium and 4.64 percent risk-free rate. Calculate the WACC. Enter the answer in percents.

Reference no: EM132045955

Questions Cloud

How many months will it take to pay off the card : If he does not charge anything else and sends the credit card company $513 every month, how many months will it take to pay off the card?
Using arithmetic and geometric growth rates : What is your best estimate of the company’s cost of equity capital using arithmetic and geometric growth rates?
What is her cash flow under current capital structure : Melanie, a shareholder of the firm, owns 260 shares of stock. What is her cash flow under the current capital structure,
What is effective annual interest rate on line of credit : What is the effective annual interest rate on this line of credit?
What is the firm pretax cost of debt : GIMP Inc. is trying to determine its cost of debt. What is the firm's pretax cost of debt? What is the firm's weighted average cost of capital?
Calculate weighted average cost of capital : During last year, it issued 50,000 bonds of $1,000 par (FV) paying 10% coupon annually maturing in 20 years. Calculate the weighted average cost of capital.
Movements to be correlated with business prospects : How do you expect XYZ stock price movements to be correlated with ABC's business prospects? Explain why.
About to agree to the peps transaction : Just as Times Mirror is about to agree to the PEPS transaction, Congress passes a sweeping tax reform of the rules on constructive sales,
Suppose there are no coal derivatives : Suppose there are no coal derivatives. But there are cash settled natural gas derivatives. Could these be used to help XYZ? Why or why not?

Reviews

Write a Review

Financial Management Questions & Answers

  Foreign company acquisition

Acquisition by a foreign company and the effects of that decision and the results of foreign exchange in Euro and the exchange rate differences.

  Financial management for profit and non profit organizations

In this essay, we are going to discuss the issues of financial management in a non-profit organisation.

  Method for estimating a venture''s value

Evaluate venture's present value, cash and surplus cash and basic venture capital.

  Replacement analysis

This document show the Replacement Analysis of modling machine. Is replacement give profit to company or not?

  Business finance task - capital budgeting

Your company is considering using the payback period for capital-budgeting. Discuss the advantages and disadvantages of this technique.

  Analysis of the investment

In this project, you will focus on one of these: the additional cost resulting from the purchase of an apple press (a piece of equipment required to manufacture apple juice).

  Conduct a what-if analysis

Review the readings and media for this unit, including the Anthony's Orchard case study media. Familiarise yourself with the Anthony's Orchard company and its current situation.

  Determine operational expenditures

Organisations' behaviour is guided by financial data. In the short term, such data will help determine operational expenditures; in the long term, historical data may help generate forecasts aimed at determining strategic plans. In both instances.

  Personal financial management

How much will you have left over each half year if you adopt the latter course of action?

  Sources of finance for expansion into new foreign markets

A quoted company is considering several long-term sources of finance for expansion into new foreign markets.

  Long term financial planning

This assignment is designed for analyze Long term financial planning begins with the sales forecast and the key input in the long term fincial planning.

  Explain the role of fincial manager

This assignment explain the role of fincial manager, function of manger. And what are the motives of financial manager.

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