1. Calculate the WACC for the company below. With a capital structure of 50% debt and 50% stock, the company's CFO has acquired the following information:
   1. The yield to maturity of the company's bonds is 7%.
   2. The coupon rate on corporate bonds is 5%.
   3. The next expected dividend is expected to be $7.00
   4. The dividend rate is expected to increase at a steady rate of 5% per year
   5. Share price currently $75 per share
   6. Tax rate 35%

What is WACC?

2. Calculate WACC for the following company: Jelly Inc.'s target capital structure is 40% debt, 10% preferred stock, and 50% common stock.
   1. The company's 15-year, 7% coupon, 1000 par bonds are selling for $980
   2. The risk-free rate is 5%
   3. The expected return in the market is 10%.
   4. Jelly's beta 1.2
   5. The company's tax rate is 30%.
   6. Preferred stock price is $90 and preferred dividend is $9.

What is Jelly's WACC?

3. A company just paid a dividend of $2.00 per share. The dividend is expected to grow at a steady rate of 7 percent per year. The stock is currently selling for $42. What is the cost of equity?

The answer must be a decimal point. So if the answer is 8.12%, enter 8.1.

4. Outdoor Enterprises has outstanding bonds with an annual coupon of 10 percent. The bonds have a maturity of 15 years and are currently priced at $1,050. The face value of the bond is $1,000. What is the firm's pre-tax cost of debt?

5. Advanced Products currently has outstanding bonds priced at $980. The maturity of the bonds is 12 years and includes an annual coupon of 8%. The tax rate is 40%. What is the firm's after-tax cost of debt?

Answer rating: 100% (QA)

1 WACC wd x rd x 1 tax we x re where wd weight of debt 50 we weight of equity ... View the full answer