What is Trojan WACC

Assignment Help Accounting Basics
Reference no: EM132040178

Question - Trojan Services' CFO is interested in estimating the company's WACC and has collected the following information:

The company has bonds outstanding that mature in 26 years with an annual coupon of 7.5%. The bonds have a face value of $1,000 and sell in the market today for $920.

The risk free rate is 6%.

The market risk premium is 5%.

The stock's beta is 1.2.

The company's tax rate is 40%.

The company's target capital structure consists of 70% and 30% debt.

The company uses the CAPM to estimate the cost of equity and does not include flotation costs as part of its cost of capital. What is Trojan's WACC?

A. 10.87%

B. 9.39%

C. 9.89%

D. 9.75%

Reference no: EM132040178

Questions Cloud

What type of hydrocarbon is 2-octene : What type of hydrocarbon is 2-octene, and what about the structure allows 2-octene to be classified as this type of hydrocarbon?
What is the amount of outstanding checks : In the month of November, Sunland Company Inc. wrote checks in the amount of $19200. What is the amount of outstanding checks at the end of November
What volume will the gas occupy at a pressure : What volume will the gas occupy at a pressure of 0.15 atm please explain how you got the answer?
Potassium hydrogen phosphate : What volume of 0.08892M HNO3 is required to react completely with 0.2352 g of potassium hydrogen phosphate?
What is Trojan WACC : The company uses the CAPM to estimate the cost of equity and does not include flotation costs as part of its cost of capital. What is Trojan's WACC
Electronegative when looking at periodic table of element : How are you able to determine which atom is more electronegative when looking at the periodic table of elements.
Calculate the owners gain from this concession : The Levitt report shows NHL revenues at 2.094 billion in 1998, throughout the lockout, the owners claimed that players were receiving 75% of the revenue.
Ammonium nitrate to nitrogen-oxygen and water vapor : How many liters of gas at 307.0 oC and 1.00 atm are fomed by the explosive decomposition of 15.0 kg of ammonium nitrate to nitrogen, oxygen.
Calculate the irr assuming a cost of capital : What is the NPV of above project if the initial investment was $35,000? Calculate the IRR assuming a cost of capital of 11%.

Reviews

Write a Review

Accounting Basics Questions & Answers

  Briefly describe the role of a system user in thesystems

Briefly describe the role of a system user in thesystems investigation and systems analysis stages of a project.

  Discuss accounting equation for a governmental fund

Analyze the above transactions by using the accounting equation for a governmental fund

  Jabar corporation a c corporation projects that it will

jabar corporation a c corporation projects that it will have taxable income of 255000 before incurring any lease

  Find development cost per unit for each product

Development cost per unit for each product equals the total costs of developing the software product divided by the anticipated unit sales over the life.

  How much is the expected total variable cost on the august

If production and sales are budgeted to change to 140 chairs in August, how much is the expected total variable cost on the August budget

  What is this firm debt-equity ratio

Du Pont Identity Finley Fire Prevention Corp. has a profit margin of 7 percent, total asset turnover of 1.94, and ROE of 23.70 percent. What is this firm's debt-equity ratio?

  What is the ear on your credit card

When you look closer, it states that the interest is compounded daily. What is the EAR (or the Effective Annual Rate) on your credit card?

  Archware systems has total assets of 35594 billion total

archware systems has total assets of 35.594 billion total debt of 9.678 billion and net sales of 23.370 billion. their

  Calhoun inc has forecast purchases on account to be 310000

calhoun inc has forecast purchases on account to be 310000 in march 370000 in april 420000 in may and 490000 in june.

  Unit cost for the month for materials

There was no units in process at the beginning or at the end of the month , and 20,000 units were completed. Determine the unit cost for the month for materials, labor, and factory overhead.

  Prepare a journal entry to record the sale of these notes

Rogers Communication Inc. is a diversified Canadian communications and media company engaged in wireless, Prepare a journal entry to record the sale

  How much interest is paid each interest period

How much interest is paid each interest period? How much bond interest expense is recorded on the first interest date (after the issue date)?

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