Vital Pharmaco has 240,000 shares of common stock outstanding at a market price of $50 a...
Fantastic news! We've Found the answer you've been seeking!
Question:
![image text in transcribed](https://s3.amazonaws.com/si.experts.images/answers/2024/05/664690223e7ef_4506646902222808.jpg)
Transcribed Image Text:
Vital Pharmaco has 240,000 shares of common stock outstanding at a market price of $50 a share. Next year, Vital Pharmaco is expected to pay an annual dividend in the amount of $1.80 per share. The dividend growth rate is 3%. Vital Pharmaco also has 18,000 bonds outstanding with a face value of $1,000 per bond. The bonds carry a 9% coupon, pay interest annually, and mature in 6 years. The bonds are selling at 99% of face value. The company's tax rate is 35 %. Circle the final answer(s) for each of the items below. a) What are the capital structure weights? b) What is the cost of equity? c) What is the pre-tax cost of debt? d) What is the after-tax cost of debt? e) What is Vital Pharmaco weighted average cost of capital? Vital Pharmaco has 240,000 shares of common stock outstanding at a market price of $50 a share. Next year, Vital Pharmaco is expected to pay an annual dividend in the amount of $1.80 per share. The dividend growth rate is 3%. Vital Pharmaco also has 18,000 bonds outstanding with a face value of $1,000 per bond. The bonds carry a 9% coupon, pay interest annually, and mature in 6 years. The bonds are selling at 99% of face value. The company's tax rate is 35 %. Circle the final answer(s) for each of the items below. a) What are the capital structure weights? b) What is the cost of equity? c) What is the pre-tax cost of debt? d) What is the after-tax cost of debt? e) What is Vital Pharmaco weighted average cost of capital?
Expert Answer:
Posted Date:
Students also viewed these finance questions
-
Andrew owns a commercial office building that is insured under three property insurance contracts. He has $100,000 of insurance from Company A, $200,000 from Company B, and $200,000 from Company C....
-
According to one econometric study, Denmark and Sweden are on the wrong side of the Laffer curve for capital income taxation [Trabandt and Uhlig, 2009]. Explain what the words wrong side mean in this...
-
Elliott Company, a manufacturer of tennis rackets, started production in November 2013. For the preceding 5 years, Elliott had been a retailer of sports equipment. After a thorough survey of tennis...
-
Many corporations finance at least a part of their operations and asset purchases using debt, principally because the cost of debt financing is cheaper than equity financing. Moreover, some firms are...
-
Sorrey Company acquired $75,000 of Clayton Co., 6% bonds on April 1, 2014, at their face amount. Interest is paid semiannually on April 1 and October 1. On October 1, 2014, Sorrey Company sold...
-
John already has 92,380 in his savings account, to which he will add $131.45 end-of-month payments for 5 years. The interest rate is 1.52% compounded monthly. At the end of the first 3 years, he will...
-
Which elements of the learning process in the simulation proved most challenging? Why?
-
A red laser beam \((\lambda=647 \mathrm{~nm})\) is sent through a double slit to a screen that is \(15 \mathrm{~cm}\) wide and \(2.00 \mathrm{~m}\) away from the slits. (a) If the separation distance...
-
What was the justification for community intervention?
-
Why was harsh discipline of children encouraged?
-
What role did the family play in colonial America?
-
What is the momentum of a photon that has energy of \(5.0 \times 10^{-15} \mathrm{~J}\) ?
-
3. (4 marks) You have data on variables Y, X, Z. W. Suppose in the data, cov(X, Z) = 0 and cov(X, W) = 0. You run: - an OLS regression of Y on 1, X to get as coefficient of X and the residual...
-
What is an access control list?
-
Think of a manager for whom you have worked. What did the manager do to promote job satisfaction among the employees in the organization?
-
Identify a nursing unit where you know good patient care is given. Discuss what factors in the environment promote the delivery of high-quality patient care. Pay particular attention to how the...
-
Timmreck, T.C. Managing motivation and developing job satisfaction in the health care work environment. (2001). Health Care Manager, 2001, 20(1), 42-58. Copyright: Aspen Publishers, Inc. Using...
![Mobile App Logo](https://dsd5zvtm8ll6.cloudfront.net/includes/images/mobile/finalLogo.png)
Study smarter with the SolutionInn App