Company A wants to calculate its WACC. It has just issued a 8-year, 8% coupon, non-...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Company A wants to calculate its WACC. It has just issued a 8-year, 8% coupon, non- callable bond at par value. A's current stock price is $16 and A just paid s $1.5 per share dividend. A's dividend payment is expected to grow at a constant rate of 3% a year. A wants to keep a debt-to-capital ratio of 20%. Tax rate is 40%. If A does not have preferred stock and floatation costs, what is its WACC (please report WACC as a decimal number with four decimal places, such as 0.0562)? Your Answer: Company A wants to calculate its WACC. It has just issued a 8-year, 8% coupon, non- callable bond at par value. A's current stock price is $16 and A just paid s $1.5 per share dividend. A's dividend payment is expected to grow at a constant rate of 3% a year. A wants to keep a debt-to-capital ratio of 20%. Tax rate is 40%. If A does not have preferred stock and floatation costs, what is its WACC (please report WACC as a decimal number with four decimal places, such as 0.0562)? Your Answer:
Expert Answer:
Answer rating: 100% (QA)
To calculate the weighted average cost of capital WACC for Company A we need to consider the cost of ... View the full answer
Related Book For
Fundamentals Of Corporate Finance
ISBN: 9780135811603
5th Edition
Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford
Posted Date:
Students also viewed these finance questions
-
Paul Duncan, financial manager of EduSoft Inc., is facing a dilemma. The firm was founded 5 years ago to provide educational software for the rapidly expanding primary and secondary school markets....
-
EBIT is 22.000, taxes 34%, depreciation is 30.000. What is the operating cash flow? Anthony operates a part time auto repair service. He estimates that a new diagnostic computer system will result...
-
Sheehan Corp. is forecasting an EPS of $3.00 for the coming year on its 500,000 outstanding shares of stock. Its capital budget is forecasted at $800,000, and it is committed to maintaining a $2.00...
-
The following matrix is row-equivalent to the augmented matrix of a linear system. Describe the solution set of that system. 1 0 1 5 0000 0013 0000 Find all possible values of a for which the...
-
Verify the accuracy of the ideal gas model when it is used to calculate specific volume for saturated water vapor. Do the calculation for 10 kPa and 1 MPa.
-
-7(-2x 5y + 9)
-
Sherry Taft and I.aura Sims are opening Bank Compliance Consultants. The area is growing, and no competitors are located nearby. Their basic decision is how to organize the business. Taft thinks the...
-
Interpreting common-size income statements Exhibit 4.7 presents common-size income statements for Standard Denim and Blue Label Jeans, two apparel retailing firms, for three recent years. In addition...
-
Sandhill Company has a machine with a cost of $714000 which also is its fair value on the date the machine is leased to Pronghorn Company. The lease is for 6 years and the machine is estimated to...
-
East Hill Home Healthcare Services was organized on January 1, 2014, by four friends. Each organizer invested $10,000 in the company and, in turn, was issued 8,000 shares of $1.00 par value stock. To...
-
Advertising expenses are all included in the line "selling, general and administration expense" on the main income statement (and amounts are given in note 15). Kellogg's management clearly thinks of...
-
What is the monthly payment sise of 21 year mortgage for $169600 and an interest rate of 7.2%?
-
What are some of the car related fixed and variable costs for Zipcar, What are some of the competitive advantages and challenges of the Zipcar concept?
-
How can you formulate research question using these lines Layoff or termination of employees?
-
explain what are two ways that Outsourcing could actually improve patient care in a hospital? HAP 392
-
Graph the equation. X=-8
-
A pizza company is having difficult with late deliveries. So management has kept track of when a late delivery was made as well as who the driver was in the chart below. Time Monday Tuesday Wednesday...
-
suppose a nickel-contaminated soil 15 cm deep contained 800 mg/kg Ni, Vegetation was planted to remove the nickel by phytoremediation. The above-ground plant parts average 1% Ni on a dry-weight bas...
-
Pelamed Pharmaceuticals had EBIT of $325 million in 2018. In addition, Pelamed had interest expenses of $125 million and a corporate tax rate of 25%. a. What was Pelameds 2018 net income? b. What was...
-
See Table 2.5 showing financial statement data and stock price data for Mydeco Corp. Suppose Mydeco had purchased additional equipment for $12 million at the end of 2016, and this equipment was...
-
Nirvana Chip Designs has finished designing its next generation of chips, the XJ5000 series and is getting ready to start production. As the analyst on the project, you are required to prepare pro...
-
Assume that an account has the following characteristics: Number of items in the account-300 Recorded amount- \(\$ 600,000\) Sample size-100 Required: a. If the sample mean is \(\$ 1,800\) and mean...
-
You desire to estimate the amount of the inventory of your client. Draper. Inc. You satisfied yourself earlier as to the inventory quantities. During the audit of the pricing and extension of the...
-
The following data for a substantive test using sampling are available: Population recorded amount- \(\$ 200,000\) Tolerable misstatement \(\$ 10,000\) Number of items in the population-200 Risk of...
Study smarter with the SolutionInn App