What is the firms current weighted average cost of capital

Assignment Help Financial Management
Reference no: EM132025360

Terck, a leading pharmaceutical company, currently has a balance sheet that is as follows:

Long-term bonds $1.000

Fixed assets $1,700

Equity $1.000

Current assets $300

The firm's income statement looks as follows:

Revenues $1,000

Cost of Goods Sold (COGS) $400

Depreciation $100

EBIT $500

Long-term interest expense $100

EBT $400

Taxes $200

Net income $200

The firm's bonds are all 20-year bonds with a coupon rate of 10% that are selling at 90% of face value (the yield to maturity on these bonds is 11%). The stocks are selling at a P/E ratio of 9 and have a beta of 1.25. The riskfree rate is 6%.

What is the firm's current weighted average cost of capital?

Reference no: EM132025360

Questions Cloud

Explain what is the market value of the bond : If similar bonds are currently yielding 8% annually, what is the market value of the bond? Use semi-annual analysis.
Five traits that separate land plants from green algae : What are five traits that separate land plants from green algae?
Calculate the two years interest rate one year from now : Calculate the 2 years interest rate 1 year from now, using the pure expectations theory.
If small ears are epistatic over ear hair length : How well do these results correspond with expectation if large ears are epistatic over ear hair length? If small ears are epistatic over ear hair length?
What is the firms current weighted average cost of capital : The firm's bonds are all 20-year bonds with a coupon rate of 10% that are selling at 90% of face value (the yield to maturity on these bonds is 11%).
Hardest sense to duplicate electronically : What do you think would be the hardest sense to duplicate electronically and why?
How much is teresas transportation deduction : Teresa is a civil engineer who uses her automobile for business. Teresa drove her automobile a total of 14,800 miles during 2017.
Perform cardiovascular training : Is it better to perform cardiovascular training before resistance training or vice-versa?
How old are you today : On your tenth birthday, you recieved 100 which you invested at 4 percent interest, compounded annually. The investment is now worth 180.09.

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