A company is a collection of projects that collectively over the years provides for the production...

 

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A company is a collection of projects that collectively over the years provides for the production of the products we consume. When we look at the balance sheet of an existing company, we are observing the average for the company, as it exists today- a historical record of their financial position. Consider the following information for MAC&CHEESE: Debt-Bonds Series A Series B Series C Total Debt Preferred Shares 7% coupon 10% coupon 6% coupon Series 1 Series 2 Series 3 Total Preferred Shares 5% dividend no maturity 7.5% dividend no maturity 5.5% dividend 2 years to maturity 5 years to maturity 7 years to maturity 2 years to maturity Shareholder's Equity Common Shares Retained Earnings total Shareholders' Equity $10.0 Million $5.0 Million $15.0 Million $30.0 Million $1.0 Million $4.0 Million $3.0 Million $8.0 Million $25.0 Million $15.0 Million $40.0 Million a. Calculate the weighted average cost of financing using debt for the existing company. Show your work. b. Calculate the weighted average cost of financing using preferred shares for the existing company. Show your work. c. Shareholders require a 14% return on the equity of the firm and the firm has a tax rate of 40%. Calculate the WACC for MAC&CHEESE. Show your work. A company is a collection of projects that collectively over the years provides for the production of the products we consume. When we look at the balance sheet of an existing company, we are observing the average for the company, as it exists today- a historical record of their financial position. Consider the following information for MAC&CHEESE: Debt-Bonds Series A Series B Series C Total Debt Preferred Shares 7% coupon 10% coupon 6% coupon Series 1 Series 2 Series 3 Total Preferred Shares 5% dividend no maturity 7.5% dividend no maturity 5.5% dividend 2 years to maturity 5 years to maturity 7 years to maturity 2 years to maturity Shareholder's Equity Common Shares Retained Earnings total Shareholders' Equity $10.0 Million $5.0 Million $15.0 Million $30.0 Million $1.0 Million $4.0 Million $3.0 Million $8.0 Million $25.0 Million $15.0 Million $40.0 Million a. Calculate the weighted average cost of financing using debt for the existing company. Show your work. b. Calculate the weighted average cost of financing using preferred shares for the existing company. Show your work. c. Shareholders require a 14% return on the equity of the firm and the firm has a tax rate of 40%. Calculate the WACC for MAC&CHEESE. Show your work.

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a Calculate the weighted average cost of financing using debt Series A Amount 100 Million Coupon Rate 7 Series B Amount 150 Million Coupon Rate 10 Ser... View the full answer