Weighted cost of capital for kjwe

Assignment Help Finance Basics
Reference no: EM131117707

Kevin John Wright Express(KJWE) has a capital structure of 30% debt and 70% equity. KJWE is considering a project that requires an investment of $2.6 million. To finance this project, KJWE plans to issue 10-year bonds with a coupon interest rate of 12%. Each of these bonds has a $1,000 face value and will be sold to net KJWE $980. If the current risk-free rate is 7% and the expected market return is 14.5%, what is the weighted cost of capital for KJWE? Assume the company has a beta of 1.20 and a marginal tax rate of 40%.

  • 14.9%
  • 12.4%
  • 13.4%
  • 16.0%

Reference no: EM131117707

Questions Cloud

Closed the acquisition of gulf aviation : Gulf Aviation generates $800 million in revenue per year, with no material growth. The consolidated revenues for DefenseCo are $1.5 billion in year 1, $1.8 billion in year 2 (the year of the acquisition), and $2.5 billion in year
East coast yachts issue : How many of the coupon bonds must East Coast Yachts issue to raise the $45 million? How many of the zeroes must it issue? In 30 years, what will be the principal repayment due if East Coast Yachts issues the coupon bonds? What if it issues the zero..
Explain the pros and cons of each given method : Explain the pros and cons of each method and make a recommendation to the company. In your response, be sure to include a discussion of issuing long-term bonds, issuing additional stock, and securing venture capital.
A new automated inventory system : The Clayton Manufacturing Company is considering an investment in a new automated inventory system for its warehouse that will provide cash savings to the firm over the next five years. The firm's CFO anticipates additional earnings before interes..
Weighted cost of capital for kjwe : If the current risk-free rate is 7% and the expected market return is 14.5%, what is the weighted cost of capital for KJWE? Assume the company has a beta of 1.20 and a marginal tax rate of 40%.
Define the branches of government : Define the Branches of Government - Find a website that supports and further explains your answer
Major in finance and landed a financial planner job : You have recently graduated with a major in finance and landed a financial planner job with Barney Smith Inc., a large financial services corporation. Your first assignment is to invest $100,000 for a client.
Efn analysis for east coast yachts : After Dan's EFN analysis for East Coast Yachts (see the Closing Case in Chapter 3), Larissa has decided to expand the company's operations.
A treasury bond futures contract change : 1. By what amount will the market value of a Treasury bond futures contract change if interest rates rise from 5 to 5.25 percent? The underlying Treasury bond has a duration of 10.48 years and the Treasury bond futures contract is currently being ..

Reviews

Write a Review

 

Finance Basics Questions & Answers

  Computation of promised yield to maturity for cardiotronics

Computation of promised yield to maturity for Cardiotronic's zero coupon bonds and the probability of default that is implicit in the price of Cardiotronics outstanding zero-coupon bonds

  Which is riskier to the company

Is the agreement between the company and its investment banker an example of a negotiated or a best-efforts deal? Why? Which is riskier to the company? Why?

  Construct a bar chart of each distribution of ror

Construct a bar chart of each distribution of rates of return. Which project would you consider less risky?Why?

  Is this statement true or false

However, the second series contains an annuity. Is this statement true or false?

  Recruitment begins by specifying

Recruitment begins by specifying

  What is the real cost of a tax deductible expenditure

What is the real cost of a tax deductible expenditure? What is the depreciation tax shield?

  What is the opening income ebit for both firms what are the

firm a has 10000 in assets entirely financed in equity.firm b also has 10000 in assets but these assets are financed by

  Determine the breakeven unit sales

Two Corporation are rivals in the buggy whip industry. Their manufacturing profiles are as follows, determine the breakeven unit sales for each company.

  Explain why a 6-month treasury bill rate is not an

explain why a 6-month treasury bill rate is not an appropriate riskless rate in discounting a five-year cash

  How much money does suzie need to have in her retirement

How much money does Suzie need to have in her retirement savings account today if she wishes to withdraw $25,000 a year for 30 years? She expects to earn an average rate of return of 6 percent.

  Treasury note prices and the decline in treasury note yields

1. You want to invest in five-year U.S. Treasury notes. Unfortunately, you believe that yields will decline and prices will rise for five-year Treasury notes. Review futures in Treasury notes and set up a strategy so you can benefit from the rise in ..

  Preparing the trial balance is to test the equality of debit

preparing the trial balance is to test the equality of debits and credits.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd