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




Assignment Help
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
Refer to the facts in Exercise 11-39. In Exercise, Douglas manufactures four grades of lubricant, W-10, W-20, W-30, and W-40, from a joint process. Additional information foll
What are the two types of pricing environments for sales to external parties? In what situation does a company place the greatest focus on its target cost? How is the targe
Explain the appropriate methods for determining the amount of periodic amortization for any capitalized software development costs. Explain how software costs should be pres
Identify the fixed and variable costs from the above and comment on the cost behaviour, estimate the cost of goods manufactured and sold and prepare a revised income statement
Use the regression output to write the nonfood cost equation - compute the estimated nonfood kitchen costs (labor, supervision, utilities, etc.) per month for the coming yea
1. Using the indirect method, compute the net cash provided by operating activities for Year 2.2. Prepare a statement of cash flows for Year 2.3. Compute the free cash flow fo
Eastern Auto Supply, Inc., produces and distributes auto supplies. The company is anxious to enter the rapidly growing market for long-life batteries that is based on lithium
Net income is not the same as net cash provided by operating activities. The differences are illustrated by the following results from recent annual reports (all data are in