What is the wacc based on the cfo preference

Assignment Help Financial Accounting
Reference no: EM13134532

Sapp Trucking’s balance sheet shows a total of noncallable $45 million long-term debt with a coupon rate of 7.00% and a yield to maturity of 6.00%. This debt currently has a market value of $50 million. The balance sheet also shows that the company has 10 million shares of common stock, and the book value of the common equity (common stock plus retained earnings) is $65 million. The current stock price is $22.50 per share; stockholders' required return, rs, is 14.00%; and the firm's tax rate is 40%. The CFO thinks the WACC should be based on market value weights, but the president thinks book weights are more appropriate. What is the WACC based on the CFO’s preference (i.e., market value weights)? What is the WACC based on the president’s preference (book value weights)?

Reference no: EM13134532

Questions Cloud

Question regarding qr factorization : Determine the QR factorization of A. Use the QR factors in 1) to determine the lease squares solution to Ax=b. Ax=b is the solution related to Rx=Q^Tb
Equilibrium price of marijuana : Predict what would happen to the equilibrium price of marijuana if it were legalized. Use demand & supply analysis to answer. Provide verbal and graphical explanation.This paper has to be three pages.
Calculate the molarity of the solution : A sugar syrup solution contains 15.0% by mass of sucrose C12H22O11. The syrup has a density of 1.06 g/ml
Is there a difference in the mean waiting time : Assume the population standard deviations are not the same. At the .05 significance level, is there a difference in the mean waiting time?
What is the wacc based on the cfo preference : What is the WACC based on the CFO’s preference (i.e., market value weights)? What is the WACC based on the president’s preference (book value weights)?
Demonstrate competence of economic principles : Frederic Bastiat (1801 - 1850) was a French political economist famous for exploding popular economic misconceptions
Is there statistically significant evidence against claim : Secondhand smoke is somewhat harmful or very harmful. Is there statistically significant evidence against the representative's claim? Why or why not?
Cash revenue and kind of transaction : Pardee Company earned $25,000 of cash revenue. What kind of transaction is this?
What is the current price of the common stock : The company’s last dividend, D0, was $1.25, its beta is 1.20, the market risk premium is 5.50%, and the risk-free rate is 3.00%. What is the current price of the common stock?

Reviews

Write a Review

Financial Accounting Questions & Answers

  Evaluate the income taxes

Complete the flexible budget at the 90,000-unit level of activity. Consider that the cost of goods sold and variable operating expenses vary directly with sales and that income taxes remain at 30 % of operating income.

  Preparation of necessary entries for declaration

Preparation of necessary entries for declaration and payment of dividend and Prepare the necessary entries for the declaration and payment of the stock dividend.

  Effect on the contribution margin per unit

Effect on the contribution margin per unit and the contribution margin ratio and calculation used in a CVP analysis is the breakeven point.

  Journal entries to record stock dividend and stock split

Preparation of Journal entries to record stock dividend and stock split - Prepare the journal entries on the appropriate dates to record the stock dividend and the stock split

  What is phoenix''s merge retained earnings balance

What is Phoenix's merge retained earnings balance at 31 st December, 2013?

  How was the portion of the bonds assigned to debt

What characteristics must the convertible bonds display in order to justify the accounting treatment followed on initial recognition and how was the portion of the bonds assigned to debt on initial recognition valued

  Sinking fund payments for issue of bonds

Sinking fund payments for issue of bonds - What is the lowest level to which O'Dowell's EBIT can drop in the first year the bonds are issued without violating the covenants of the loan? O'Dowell's tax rate is 40%.

  Evaluate internal rate of return method

In the payback method, depreciation is added back to net operating income when computing the net annual cash flows and net present value method and the internal rate of return method can be used as a screening tool in capital budgeting decisions.

  Prepare a pro forma balance sheet

Prepare a pro forma balance sheet dated December 31, 2008 and show the financing changes suggested by the statement prepared in part A

  Indicate how dividends should be distributed to preferred

Indicate how dividends should be distributed to the preferred stock and common stock. Total and per share.

  Create the adjusting entries using good form

Create the adjusting entries using good form for each of the subsequent situations as of January 31 (measurement date) for the one month of January

  Illustrate what would be the effect on your analysis

Which company will have the higher debt/capital ratio (assume no other debt and identical equity)? ABC's debt matures in 18 months and DEF's debt matures in 9 years. Illustrate what would be the effect on your analysis?

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