oogle - Search X P Pearson eText X P Spreadsheet Exercise X + ucts/5L4C7ZWQ3W3/pages/a6c7f7ca34d0b6ed6fda87bb72e1e105a4398bc25?locale=&key=14455107122218505353202024 452 Summary:...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
oogle - Search X P Pearson eText X P Spreadsheet Exercise X + ucts/5L4C7ZWQ3W3/pages/a6c7f7ca34d0b6ed6fda87bb72e1e105a4398bc25?locale=&key=14455107122218505353202024 452 Summary: The Cost of Capital Spreadsheet Exercise Excel Nova Corporation is interested in measuring the cost of each specific type of capital as well as the weighted average cost of capital (WACC). Historically, the firm has raised capital in the following manner: Source of capital Long-term debt Preferred stock Common stock equity Weight 35% 12 53 The tax rate of the firm is currently 21%. The needed financial information and data are as follows: Debt Nova can raise debt by selling $1,000-par-value, 6.5% coupon interest rate, 10-year bonds on which annual interest payments will be made. To sell the issue, an average discount of $20 per bond needs to be given. There is an associated flotation cost of 2% of par value. Preferred stock Preferred stock can be sold under the following terms: The security has a par value of $100 per share, the annual dividend rate is 6% of the par value, and the flotation cost is expected to be $4 per share. The preferred stock is expected to sell for $102 before cost considerations. Common stock The current price of Nova's common stock is $35 per share. The cash dividend is expected to be $3.25 per share next year. The firm's dividends have grown at an annual rate of 5%, and it is expected that the dividend will continue at this rate for the foreseeable future. The flotation costs are expected to be $2 per share. Nova can sell new common stock under these terms. < 452 > hp A E 452 453 455 458 504 546 To Do Create a spreadsheet to answer the following questions: a. Calculate the after-tax cost of debt. b. Calculate the cost of preferred stock. c. Calculate the cost of retained earnings. d. Calculate the cost of new common stock. hs e. Calculate the firm's WACC using retained earnings and the capital structure weig shown in the table above. f. Calculate the firm's WACC using new common stock and the capital structure weig shown in the table above. 452 A hp hp F9 F10 F11 F6 F7 F8 Esc F1 F2 F3 F4 F5 $ S 005 % 6 CO @ 4 3 Q 2 W Y E R T A S 87 & 7 D F G H X C 8* ( ) 9 P + || oogle - Search X P Pearson eText X P Spreadsheet Exercise X + ucts/5L4C7ZWQ3W3/pages/a6c7f7ca34d0b6ed6fda87bb72e1e105a4398bc25?locale=&key=14455107122218505353202024 452 Summary: The Cost of Capital Spreadsheet Exercise Excel Nova Corporation is interested in measuring the cost of each specific type of capital as well as the weighted average cost of capital (WACC). Historically, the firm has raised capital in the following manner: Source of capital Long-term debt Preferred stock Common stock equity Weight 35% 12 53 The tax rate of the firm is currently 21%. The needed financial information and data are as follows: Debt Nova can raise debt by selling $1,000-par-value, 6.5% coupon interest rate, 10-year bonds on which annual interest payments will be made. To sell the issue, an average discount of $20 per bond needs to be given. There is an associated flotation cost of 2% of par value. Preferred stock Preferred stock can be sold under the following terms: The security has a par value of $100 per share, the annual dividend rate is 6% of the par value, and the flotation cost is expected to be $4 per share. The preferred stock is expected to sell for $102 before cost considerations. Common stock The current price of Nova's common stock is $35 per share. The cash dividend is expected to be $3.25 per share next year. The firm's dividends have grown at an annual rate of 5%, and it is expected that the dividend will continue at this rate for the foreseeable future. The flotation costs are expected to be $2 per share. Nova can sell new common stock under these terms. < 452 > hp A E 452 453 455 458 504 546 To Do Create a spreadsheet to answer the following questions: a. Calculate the after-tax cost of debt. b. Calculate the cost of preferred stock. c. Calculate the cost of retained earnings. d. Calculate the cost of new common stock. hs e. Calculate the firm's WACC using retained earnings and the capital structure weig shown in the table above. f. Calculate the firm's WACC using new common stock and the capital structure weig shown in the table above. 452 A hp hp F9 F10 F11 F6 F7 F8 Esc F1 F2 F3 F4 F5 $ S 005 % 6 CO @ 4 3 Q 2 W Y E R T A S 87 & 7 D F G H X C 8* ( ) 9 P + ||
Expert Answer:
Posted Date:
Students also viewed these finance questions
-
The Howell Corporation has the following account balances (in millions): Required Prepare an income statement and a supporting schedule of cost of goods manufactured for the year ended December 31,...
-
Mercedes-Benz of North America (MBNA), the exclusive U.S. distributor of Mercedes-Benz (Mercedes) automobiles, was a wholly owned subsidiary of Daimler-Benz Aktiengesellschaft (DBAG), the...
-
On July 31, 2019, the payroll register for White Sales Company showed the following totals for the month: gross earnings, $38,950; social security tax, $2,414.90; Medicare tax, $564.78; income tax,...
-
Advertising Technologies, Inc. (ATT) specializes in providing both published and online advertising services for the business marketplace. The company monitors its costs based on the cost per column...
-
Ocean Division currently earns $780,000 and has divisional assets of $3.9 million. The division manager is considering the acquisition of a new asset that will add to profit. The investment has a...
-
Course : Analysis of experience plans MAT3378 Exersice: In a study devoted to memory processes, animals were animals were tested in an avoidance learning task. During the learning trial, the animals...
-
se the reformulated financial statements for Qantas Airways Limited to answer Questions 1, 2, 3 and 4. 1) Free Cash Flow Analysis 2) Profitability Analysis 3) Systematic Growth Valuation 4) Residual...
-
Identifying Operating and Nonrecurring Income Components Following is the The Dow Chemical Company income statement. (In millions, except per share amount) For Year Ended Net sales Cost of sales...
-
Automobile manufacturers and dealers use a variety of marketing devices to sell cars. Among these are rebates and low-cost dealer-arranged financing packages. To determine which method of reducing...
-
Company A announced a total dividend of $ 5 0 0 , 0 0 0 paid to shareholders in the upcoming quarter. Currently, the value of the equity shares is $ 5 5 0 , 0 0 0 and the par value is $ 0 . 4 0 . a ....
-
IAS 10 Events After the Reporting Period prescribes relevant treatment for events that occur after an entity's reporting period has ended. a) Explain what is meant by the term "Events After the...
-
Marin Company makes several products, Including canoes. The company reports a loss from Its canoe segment (see below). All its variable costs are avoidable, and $320,000 of Its fixed costs are...
-
1. If fixed costs are $750,000 and variable costs are 80% of sales, what is the break-even point in sales dollars? a. $937,500 b. $600,000 c. $3,750,000 d. $1,275,000 2. If fixed costs are $700,000...
-
The baseball player A hits the ball from a height of 3.36 ft with an initial velocity of 34.8 ft/s. 0.14 seconds after the ball is hit, player B who is standing 15 ft away from home plate begins to...
Study smarter with the SolutionInn App