+1-415-670-9189
info@expertsmind.com
What is the market interest rate on xyz debt
Course:- Cost Accounting
Reference No.:- EM131469709




Assignment Help
Expertsmind Rated 4.9 / 5 based on 47215 reviews.
Review Site
Assignment Help >> Cost Accounting

Review the questions below and use the data provided in the question to solve the calculation. This assignment must be submitted as an Excel file.

Q1. What is the market interest rate on XYZ's debt and its component cost of debt?

Coupon rate

12%

Coupons per year

2

Years to maturity

15

Price

$1,153.72

Face value

$1,000

Tax rate

40%

Q2. What is the firm's cost of preferred stock?

Nominal dividend rate

10%

Dividends per year

4

Par value

$100

Price

$111.10

Q3. What is XYZ's estimated cost of common equity using the CAPM approach?

Β

1.2

rRF

7%

RPM

6%

Q4. What is the estimated cost of common equity using the DCF approach?

Price

$50

Current dividend

$4.19

Constant growth rate

5%

5. What is the bond-yield-plus-risk-premium estimate for XYZ's cost of common equity?

"Bond yield + RP" premium - 4%

market interest rate on XYZ's debt - 10%

6. What is your final estimate for rs?

METHOD

ESTIMATE

CAPM

14.20%

DCF

13.80%

rd + RP

14.00%

7. XYZ estimates that if it issues new common stock, the flotation cost will be 15%. XYZ incorporates the flotation costs into the DCF approach. What is the estimated cost of newly issued common stock, considering the flotation cost?

% Flotation cost - 15%

Net proceeds after flotation - $42.50

8. What is XYZ's overall, or weighted average, cost of capital (WACC)?  Ignore flotation costs.

wd

30%

rd (1-T)

6.00%

wp

10%

rp

9.00%

wc

60%

rs

14.00%




Put your comment
 
Minimize


Ask Question & Get Answers from Experts
Browse some more (Cost Accounting) Materials
Swisher Company's computer system generated the following trial balance on December 31, 2013. The company's manager knows that the trial balance is wrong because it does not s
Prepare a contribution margin income statement. Assume there were no beginning or ending inventories in 2012 - how much would Gordon Company have lost if only 80 units had bee
The arguments for using the profit measure as the all-encompassing measure of the performance of a business and the limitations of profit-measurement approach and of undue d
Has it decreased or increased over the past few years? What is its percentage to total assets for last two years? Has the percentage decreased, increased, or remained the sa
What does the price elasticity of demand measure? What is inelastic demand? What is elastic demand? According to the economists' approach to setting prices, the profit-max
Compare and contrast ABC costing and traditional costing methods, giving examples. In the assigned case, which system provides a more accurate picture of the cost incurred to
Prepare journal entries for each transaction - stock dividend on the common stock when the market value of the stock is $22 per share. the corporation has 120,000 shares of c
what lump sum at employment date would make her indifferent between the two options and  Reliable would recognize gross profit and What amount does Fenland need to invest each