Calculate the weighted average cost of capital, Financial Accounting

Verizon Corporation has 55% equity and 45% debt (market values) in its capital structure. The pretax cost of debt is 7%, and that of equity 12%. The total value of the company is $75 billion and its income tax rate is 35%. Verizon has to raise $4 billion in new capital, which will make the EBIT of the company to be $4 billion, with a standard deviation of $2 billion. The company has decided to raise the new capital half with debt and half with equity at the existing rates. Calculate Verizon's new WACC, and the probability that its interest coverage ratio will be less than one.

Answer: 8.629%, 22.70%

 

Posted Date: 3/8/2013 5:03:16 AM | Location : United States







Related Discussions:- Calculate the weighted average cost of capital, Assignment Help, Ask Question on Calculate the weighted average cost of capital, Get Answer, Expert's Help, Calculate the weighted average cost of capital Discussions

Write discussion on Calculate the weighted average cost of capital
Your posts are moderated
Related Questions

Resolution For Voluntary Winding Up A company may be put into voluntary liquidation: 1) By ordinary resolution: where any period fixed for the duration of the company has ex

Carminho Building Products Ltd (an Australian company) is a client of Rodrigues Accounting (RA). Carminho Building Products Ltd (CBP) is involved in the development, manufacture a

RSC Designs quarterly selling and distribution expenses are $100,000 including ($10,000 depreciation), and are expected to be paid in the quarter incurred. Quarterly administrat

How should I handle Booking an invoice in one month for Raw material that has not been received until the following month?

Should Touring Enterprises consider liabilities as a part of its permanent financing? Why or why not?n #Minimum 100 words accepted#

DIVIDENDS Dividends must be declared and paid in accordance with the following rules: 1) The first dividend must be declared and paid within four months of the first meeting o

Evaluate 1-1/3(5/6 - 1/2) ---------------- 2/5 / 2/5(5/6-2/3)

A gift of residue Where property is not given by a specific legacy nor by a general legacy, it makes up the residue of the testator's estate.  If the testator fails to make a g

Holding company with more than one subsidiary company Under this type of structure, the holding company controls more than one company. For example H ltd may Own 80% of S1, 75%