What is the firms weighted average cost of capital

Assignment Help Financial Management

Reference no: EM131016150

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 8.4%, the firm's cost of preferred stock, rp, is 7.9% and the firm's cost of equity is 12.4% for old equity, rs, and 13.14% 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.

Reference no: EM131016150

Questions Cloud

Stock worth to you if the dividends increase : Blasco just paid an annual dividend of $1.24 a share. What is one share of this stock worth to you if the dividends increase by 2 percent annually and you require a rate of return of 12 percent?

Sales growth rate and price-to-earnings ratio : Consider the cell phone giant company Apples. Apple has 3 Key Financial Ratios: gross margin, sales growth rate, and price-to-earnings (P/E) ratio. How could you use Apple’s example in the real world and how this can help run a business?

Firms cost of equity using each of these three approaches : Barton Industries estimates its cost of common equity by using three approaches: the CAPM, the bond-yield-plus-risk-premium approach, and the DCF model. Barton expects next year's annual dividend, D1, to be $1.80 and it expects dividends to grow at a..

What price would you estimate for halliford stock : Halliford Corporation expects to have earnings this coming year of $2.63 per share. Halliford plans to retain all of its earnings for the next two years. For the subsequent two years, the firm will retain 49% of its earnings. It will then retain 23% ..

What is the firms weighted average cost of capital : 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%. What is the firm's ..

Common size income statements represent all figures : Common size income statements represent all figures on the income statement

What is the present value of these cash flows : You have been offered the opportunity to invest in a project which is expected to provide you with the following cash flows: $5,400 in 1 year, $13,800 in 2 years, and $7,400 in 3 years. If the appropriate interest rates are 6 percent for the first ye..

Included in computing earnings before taxes : Which of the following is not included in computing EBT (earnings before taxes)?

Is bankone exposed to an appreciation or depreciation : Bankone issued $200 million worth of one-year CD liabilities in Brazilian reals at a rate of 6.50 percent. The exchange rate of U.S. dollars for Brazillian reals at the time of the transaction was $1.00/Br 1. (LG 9-5). Is Bankone exposed to an apprec..

User Account

All Pages