What is the weighted average cost of capital of machinery

Assignment Help Operation Management
Reference no: EM131989549

A company is looking to invest in new machinery. The current financing is 30% debt, 45% common stock, and 25% preferred stock. The company anticipates the new debt issue will consist of 10-year $1,000 face-value bonds that will be priced at par. The bonds will pay an annual coupon of $80. Flotation costs for this new bond issue will be $35 per bond. The company has recently paid a dividend of $2.30 and is expecting to increase the dividend by 5% per year, indefinitely. The current share price for the company's common stock is $29.76. The company also plans to issue preferred stock that will pay a dividend per share of $3.50 per year in perpetuity. The market price of the preferred stock will be $32. The flotation costs of both the common stock issue and preferred stock issue will be $4.50 per share.

What is the weighted average cost of capital for this company if the company's marginal tax rate is 39%?

Reference no: EM131989549

Questions Cloud

What is the payback period for this stream of cash flows : What is the payback period for this stream of cash flows if the discount rate is 16%?
Prepare the service revenue budget : Prepare the service revenue (sales) budget for 2017 by listing the departments and showing for each quarter and the year in total and billable hours.
Discuss the major methods of company valuation : In doing so, explain each method and compare their advantages and disadvantages with the other methods you choose to discus
Compute the customer margin of big sky outfitters : The company's direct labor rate is $16 per hour. Using the company's activity-based costing system, compute the customer margin of Big Sky Outfitters.
What is the weighted average cost of capital of machinery : A company is looking to invest in new machinery. The current financing is 30% debt, 45% common stock, and 25% preferred stock.
What is the materials price variance for june : The company applies variable overhead on the basis of direct labor-hours. What is the materials price variance for June?
What is the weighted average cost of capital : What is the firm's weighted average cost of capital if its debt-equity ratio is 0.58 and the tax rate is 30 percent?
How responsibility centers are used for budgeting process : Explain how responsibility centers are used for the budgeting process. You must respond to at least two of your other classmates' posts to receive full credit.
Compose a short memo regarding stakeholder reaction : Compose a short memo (200 words) to the CEO regarding your chosen stakeholder's reaction to the changes and the ethical considerations

Reviews

Write a Review

Operation Management Questions & Answers

  Construct average and range charts

A machining operation requires close tolerances on a certain part for automobile engines. The current specification for this measurement is 3.0 cm ± .001.

  How will marketing technology be used throughout the process

Identify specific tactics and steps that will be taken (primarily focused on distribution, marketing communications, promotion, PR, for example).

  Find product and brand that is using sales promotion

Find a product/brand that is using a sales promotion or sometimes uses a sales promotion. For that sales promotion: Describe how you think the sales promotion might benefit the product/brand. Briefly explain some risks for the product/brand in doing ..

  Modern technology in each of these service industries

Describe at least one application of modern technology in each of these service industries

  Advantages and disadvantages of using house of quality

What are the advantages and disadvantages of using house of quality? To implement "house of quality" in a company, what are some of the critical success factors

  Express your opinions about executive compensation

Why must some employees be paid overtime and others are exempt? Explain what job sharing is and how it typically works in terms of compensation and benefits. How much did your CEO receive last year? If you don’t know go to the AFL-CIO website. Expres..

  Maintenance office of medium sized repair facility

Scope: You are in the maintenance office of a medium sized repair facility. The senior manager has asked you to come up with a project plan and budget to move your 51-person maintenance facility from hangar 12 to the new and larger hangar 18. Create ..

  Compare and contrast the different kinds of costs

Then think about a product(s) you recently purchased-which inventory costs category is probably the largest for this product(s) and how could this category of inventory cost be reduced? Be sure to defend your answer and respond to at least 2 othe..

  Determines roles and responsibilities of team members

Developing a human resources plan is essential to project success as it determines roles and responsibilities of team members and how the team will interact.

  Find the standard time for this operation

The average time per cycle was 10.7 minutes, and the standard deviation was 1.20 minutes for a worker with a performance rating of 133 percent.

  Explain what a data dictionary is making sure

Explain what a data dictionary is, making sure to include definitions of the terms data element and record in your explanation.

  Recently experienced an enormous growth rate

A firm that has recently experienced an enormous growth rate is seeking to lease a small plant in Memphis, TN; Biloxi, MS; or Birmingham, AL. Prepare an economic analysis of the three locations given the following information: Annual costs for buildi..

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