A company has 10 million shares outstanding trading for $7 per share. It also has $300 million
Question:
A company has 10 million shares outstanding trading for $7 per share. It also has $300 million in outstanding debt. If its equity cost of capital is 15%, and its debt cost of capital is 9%, and its effective corporate tax rate is 40%, what is its weighted average cost of capital?
A company has the opportunity to do any of the projects for which the net cash flows per year are shown below. The company has a cost of capital of 12%. Which should the company do and why? You must use at least two capital budgeting methods. Show your work.
Year | A | B | C |
0 | -350 | -250 | -250 |
1 | 100 | -50 | 100 |
2 | 100 | 100 | 100 |
3 | 100 | 100 | 100 |
4 | 100 | 100 | 100 |
5 | 100 | 100 | 100 |
6 | 50 | 100 | 100 |
7 | -200 | -200 | 0 |
A stock has just paid a dividend and has declared an annual dividend of $2.00 to be paid one year from today. The dividend is not expected to grow. The return on equity for similar stocks is 12%. What is P 0 ?
A stock has just paid a dividend and has declared an annual dividend of $2.00 to be paid one year from today. The dividend is expected to grow at a 5% annual rate. The return on equity for similar stocks is 12%. What is P 0 ?
Corporate Finance A Focused Approach
ISBN: 978-1439078082
4th Edition
Authors: Michael C. Ehrhardt , Eugene F. Brigham