Estimate the wacc and cost of capital, Macroeconomics

Assignment Help:

Cowboy Corporation is estimating its WACC.  The firm's debt structure contains: (1) 30,100 long-term bonds with an 8.1% coupon, paid semiannually, a 10 years-to-maturity, and a $1000 face-value which sells for $1200; (2) 20,200 callable long-term bonds with an 4.6% coupon, paid semiannually, a 15 years-to-maturity, an 8-year call protection, an 8.1% call premium, and a $1000 face-value which sells for $850; and (3) 2000, 20-years-to-maturity, zero-coupon bonds that sell for 40% of par with a par of $25,000.  The firm also has 500,000 shares of preferred stock which sells at $120 per share, and pays a 10 percent (of $100 par) annual dividend.  Cowboy's common stock, which will be paid a dividend of $4.00 next year, sells for $80.00 per share. Common dividends are expected to grow at a rate of 7 percent per year.  Cowboy has 2,000,000 common shares outstanding.  The firm's marginal tax rate is 35 percent. 

A.   What are costs of debt, preferred stock, and equity components of capital?

B.   What is Cowboy's WACC

 


Related Discussions:- Estimate the wacc and cost of capital

Supply and Demand, During the 1990s, technological advance reduced the cost...

During the 1990s, technological advance reduced the cost of computer chips. Explain, with the use supply and demand diagrams, how the following markets are affected in terms of pr

Explain fines imposed on violations, In 2001, Puerto Rico enacted a law tha...

In 2001, Puerto Rico enacted a law that requires specific labels on cement sold in Puerto Rico and imposes fines for any violations of these requirements. The law prohibits the sal

Liberalisation and changing sources of fdi, Liberalisation and Changing Sou...

Liberalisation and Changing Sources of FDI: European countries  had been major sources of FDI inflows  to India until 1990. However, their relative importance declined in the

Neoclassical view, Roles of government in controlling market forces under n...

Roles of government in controlling market forces under neoclassical view

Variables are discrete, Which of these variables are discrete and which are...

Which of these variables are discrete and which are continuous random variables? a) The number of new accounts established by a salesperson in a year. b) The time between customer

Rapid growth of the national debt, He rapid growth of the national debt ala...

He rapid growth of the national debt alarmed some politicians and created pressure for restricting Congress's unlimited ability to spend. Efforts to Reduce the Deficit, discuss the

Aggregate demand and aggregate supply, Find one or more articles in the wal...

Find one or more articles in the wall street Journal or other business publications that describe changes in fiscal or monetary policies in the United States. Discuss how these pol

Makers respond to the crisis monetary policy, Did monetary policy contribut...

Did monetary policy contribute to the economic crisis of 2008? Why or why not? How did monetary policy makers respond to the crisis? Has their response created an environment for f

Write Your Message!

Captcha
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