Calipso Beverages has 300,000 shares of stock outstanding, with one share selling for $310 in the...
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Calipso Beverages has 300,000 shares of stock outstanding, with one share selling for $310 in the stock market. Calipso's shareholders expect a 14% return on their investment. All of the company's debt comes from a $24 million loan it received 5 years ago. The entire loan is to be repaid with a single $24 million payment 10 years from now. Meanwhile, Calipso is making annual interest payments equal to $400,000. Assuming Calipso faces a 27% tax rate, calculate Calipso's weighted average cost of capital. Calipso Beverages has 300,000 shares of stock outstanding, with one share selling for $310 in the stock market. Calipso's shareholders expect a 14% return on their investment. All of the company's debt comes from a $24 million loan it received 5 years ago. The entire loan is to be repaid with a single $24 million payment 10 years from now. Meanwhile, Calipso is making annual interest payments equal to $400,000. Assuming Calipso faces a 27% tax rate, calculate Calipso's weighted average cost of capital.
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Answer rating: 100% (QA)
First we need to calculate the cost of debt The present value of the interest payments is calculated ... View the full answer
Related Book For
Foundations of Financial Management
ISBN: 978-1259024979
10th Canadian edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta
Posted Date:
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