Debt is represented by bonds issued 5 years ago with an original maturity of 30 years,...

 

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Debt is represented by bonds issued 5 years ago with an original maturity of 30 years, a coupon rate of 8.7%, a par value of $1,000, and a quoted price of 75.67. The bonds pay interest semiannually. The pays a $2.00 dividend preferred stock annually and is currently priced at $11.80 per share. The common stock is priced at $80.00 and just paid a dividend of $2.00. The dividend is expected to grow at 4.6% per year from here on out. Stark Industries has a marginal tax rate of 20%. Calculate the book-value weights for each source of capital. (10 points total) Source Common Stock Preferred Stock Debt Source Common Stock Preferred Stock Debt Calculate the market-value weights for each source of capital. (10 points total) Source Common Stock Preferred Stock Debt Weight 40.37% 5.13% 54.50% Method Book Value Market Value Weight 91.26% $ 0.14% $ 8.60% $ 1,507,149,658.00 Calculate the after-tax costs of capital for each source of capital. (10 points total) Cost 16,000,000,000 24,780,000.0 7.22% 16.95% 6.66% 30-5-25 Calculate the weighted average cost of capital using both the book value and market value weights. (10 points total) Price is 756.7 WACC 7.41% 7.41% Debt is represented by bonds issued 5 years ago with an original maturity of 30 years, a coupon rate of 8.7%, a par value of $1,000, and a quoted price of 75.67. The bonds pay interest semiannually. The pays a $2.00 dividend preferred stock annually and is currently priced at $11.80 per share. The common stock is priced at $80.00 and just paid a dividend of $2.00. The dividend is expected to grow at 4.6% per year from here on out. Stark Industries has a marginal tax rate of 20%. Calculate the book-value weights for each source of capital. (10 points total) Source Common Stock Preferred Stock Debt Source Common Stock Preferred Stock Debt Calculate the market-value weights for each source of capital. (10 points total) Source Common Stock Preferred Stock Debt Weight 40.37% 5.13% 54.50% Method Book Value Market Value Weight 91.26% $ 0.14% $ 8.60% $ 1,507,149,658.00 Calculate the after-tax costs of capital for each source of capital. (10 points total) Cost 16,000,000,000 24,780,000.0 7.22% 16.95% 6.66% 30-5-25 Calculate the weighted average cost of capital using both the book value and market value weights. (10 points total) Price is 756.7 WACC 7.41% 7.41%

Answer rating: 100% (QA)

1To calculate the bookvalue weights for each source of capital we need to determine the total book value of each source of capital and divide it by the total book value of all sources of capital We ar... View the full answer