Treasury bill rate-the market risk premium is estimated

Assignment Help Financial Management

Reference no: EM131356095

The common stock of Buildwell Conservation & Construction, Inc., has a beta of .95. The Treasury bill rate is 6%, and the market risk premium is estimated at 10%. BCCI’s capital structure is 35% debt, paying a 7% interest rate, and 65% equity. Buildwell pays tax at 30%.

a. What is BCCI’s cost of equity capital? (Round your answer to 2 decimal places.)

Cost of equity capital _____ %

b. What is BCCI’s WACC? (Round your answer to 2 decimal places.)

WACC _______%

Reference no: EM131356095

Questions Cloud

What would be the weight used for equity in computation : JackITs has 6.6 million shares of common stock outstanding, 2.6 million shares of preferred stock outstanding, and 36.00 thousand bonds. If the common shares are selling for $29.70 per share, the preferred share are selling for $15.10 per share, and ..

Four shares of outstanding stock : Valley Corp.'s stock is currently selling at $33 per share. There are 1 million shares outstanding. The firm is planning to raise $2 million to finance a new project. Four shares of outstanding stock are entitled to purchase one additional share of t..

Financial forecasting is never-ending work in process : Financial Forecasting is a Never-ending Work in Process. In your words what does that mean? How does that impact financial and managerial aspects of an organization?

Bonds with coupon rate-assume investors are risk-neutral : KIC, Inc., plans to issue $5 million of bonds with a coupon rate of 8 percent and 10 years to maturity. The current market interest rates on these bonds are 7 percent. In one year, the interest rate on the bonds will be either 10 percent or 6 percent..

Treasury bill rate-the market risk premium is estimated : The common stock of Buildwell Conservation & Construction, Inc., has a beta of .95. The Treasury bill rate is 6%, and the market risk premium is estimated at 10%. BCCI’s capital structure is 35% debt, paying a 7% interest rate, and 65% equity. Buildw..

New equipment at the start of the project : Your Company is considering a new project that will require $1,010,000 of new equipment at the start of the project. The equipment will have a depreciable life of 7 years and will be depreciated to a book value of $460,500 using straight-line depreci..

Interest and the portion that goes to principal : Bill decides to purchase a new car with a sticker price of $25,000. The car dealer offers Bill either $2,000 cash back or 2% financing for 5 years. If Bill takes the financing, he will make 60 equal monthlypayments. Otherwise, he will pay $23,000 tod..

Symantec does not currently pay dividend : Symantec does not currently pay a dividend, however, in 4 years you expect they will pay their first dividend and it will be $2 per share. The dividend is expected to grow at a rate of 4% and investors’ required rate of return for Symantec stock is 8..

Which action of yours will keep career unstained in long run : After 6 years from graduation, you became a general manager, and now you have to invest your limited fund into the most profitable internal projects in your hotel. You have only enough money to support one project. Which action of yours will keep you..

User Account

All Pages