What will wacc be if firm completes capital restructuring

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Reference no: EM133326485

Question 1. Company has ROA = 6% and ROE = 30%. If Total Assets = 6,000,000€ then the firm's debt-to-equity ratio is:

Question 2. Company has EBIT of $1,340,000. Total Interest paid is 225,000. Taxes are 35%. The company has not issued any securities over the past year. If the dividend payout ratio is 50%, then Cash Flow From Assets must be

Question 3. You are retiring from your job as CFO of the firm. Your pension will pay you 5200€ per month for the next 25 years. The annual market interest rate is 9%. The new CFO offers you a lump-sum payment right now instead of 25 years of monthly payments. What is the lowest lump-sum you should be willing to accept?

Question 4. Company has a current stock price of 13.33€. The dividend next year will be 0.20€ and dividends will grow at 1% forever after that. What is the required return investors have placed on Wärtsilä? Give answer in percentage e.g.

Question 5. Company just issued 7 year bonds with face value of 1000€. The coupon rate is 3%, and the coupons are paid semi-annually. The price in the market is now 1051.64€. What is the yield to maturity? Give answer in percentage,

Question 6. Company issued bonds paying 2.25% annual coupon. Face value is 1000€. Right now, the yield to maturity on the bonds is 3.1%. The bonds have time to maturity = 8 years. What is the current price of the bonds? Give answer in euros to nearest cent

Question 7. Company A is an unlevered firm with a market value of €18,000,000. The company plans to restructure itself by issuing €6,000,000 million worth of bonds, using the proceeds to repurchase stock. If the corporate tax rate is 30%, what will the debt-to-equity ratio be after the capital restructuring? Ignore bankruptcy costs.

Question 8. Company B has a total market value of €90,000,000, and the market value of its debt is €25,000,000. The company has 5,000,000 shares outstanding. Yesterday the company paid a dividend of €2.20 per share, and the dividends are expected to grow at 5% per year forever. What is the required return of the stockholders of the company in percent?

Question 9. A new machine costs $750,000 including installation. The firm will use the reducing-balance method for 7 years to calculate depreciation. The annual depreciation percentage is 20%. The tax rate is 40%. If the firm sells the machine for $140,000 after 7 years, what is the after-tax salvage value?

Question 10. Company C, expects its EBIT to be €6,000,000 every year forever. The company currently has no debt, and its cost of equity is 15%. The corporate tax rate is 40%. The company is selling €3,000,000 in debt at a rate of interest of 8% and using the proceeds to repurchase shares. Ignore bankruptcy costs.

a) What is the current value of the firm? Give answer rounded to nearest euro.

B) What will the WACC be if the firm completes the capital restructuring?

Question 11. Company D, is thinking about building a new factory. The initial cost is €9,000,000. Bark uses straight line depreciation to zero and assumes salvage value is zero. Cash flows from the project will be the same over its 8 year life. There is no need to increase NWC at the beginning of the project. The firm has a debt-to-equity ratio = 1.5 The bonds outstanding are perpetual, paying annual coupons of €50 and have a current price of €600. The shares of the company have a price of €40 and are expected to pay a constant dividend of €8 forever. The corporate tax rate is 25%.

A. What is the firm's weighted average cost of capital? Answer in percentage

B. If management expects operating cash flows of €1,550,000 per year, and management feels the required return on the project is 6%, then what net present value does management calculate for the project?

C. Assume management is correct with their estimate of €1,550,000 in operating cash flows per year. But management has incorrectly estimated the riskiness of the project. The project is actually of the same riskiness as Bark Corp.'s existing business. What is the project's actual net present value?

D. Since the project is as risky as the firm's existing business, what is the minimum level of yearly operating cash flows necessary to make the project worthwhile?

Reference no: EM133326485

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