What is the firm weighted average cost of capital

Assignment Help Financial Management

Reference no: EM132016820

Quantitative Problem: Barton Industries expects that its target capital structure for raising funds in the future for its capital budget will consist of 40% debt, 5% preferred stock, and 55% common equity. Note that the firm's marginal tax rate is 40%. Assume that the firm's cost of debt, rd, is 7.1%, the firm's cost of preferred stock, rp, is 6.6% and the firm's cost of equity is 11.1% for old equity, rs, and 11.51% for new equity, re. What is the firm's weighted average cost of capital (WACC1) if it uses retained earnings as its source of common equity? Round your answer to 3 decimal places. Do not round intermediate calculations.

What is the firm’s weighted average cost of capital (WACC2) if it has to issue new common stock? Round your answer to 3 decimal places. Do not round intermediate calculations.

Quantitative Problem: 5 years ago, Barton Industries issued 25-year noncallable, semiannual bonds with a $1,300 face value and a 5% coupon, semiannual payment ($32.5 payment every 6 months). The bonds currently sell for $845.87. If the firm's marginal tax rate is 40%, what is the firm's after-tax cost of debt? Round your answer to 2 decimal places. Do not round intermediate calculations.

Reference no: EM132016820

Questions Cloud

Considering adding putt putt golf course to its facility : Outdoor Sports is considering adding a putt putt golf course to its facility.

Why the relative affinity of the heme for oxygen : Explain briefly why the relative affinity of the heme for oxygen and carbon monoxide is changed in the protein myoglobin?

What would happen to the stock required rate of return : If the market risk premium increased to 9%, what would happen to the stock's required rate of return?

Mutations on the function of the corresponding protein : Explain the consequences of the following mutations on the function of the corresponding protein (would the function of the protein change and elaborate on Why)

What is the firm weighted average cost of capital : What is the firm’s weighted average cost of capital (WACC2) if it has to issue new common stock?

Explain why the relative affinity of the heme : Explain why the relative affinity of the heme for oxygen and carbon monoxyde is changed in the protein myoglobin?

What criteria would be used for student admissions : write an informative essay (250 word minimum). Please use information from the lecture, assigned readings, and possibly other websites to develop your reasoning

How sensitive is the operating cash flow : How sensitive is the operating cash flow to a $1 change in the per unit sales price?

Explain mechanism of glucose and insulin : Does insulin tell cell to go to gluconeogenesis or glycolysis? Explain mechanism of glucose and insulin?

User Account

All Pages