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
The following items are found in the trial balance of M/s Sharada Enterprise on 31st December, 2000. 10 marks Summer 2013 Sundry Debtors Rs.160000 Bad Debts written off Rs 9000 Dis

As an asset The argument for this statement is that the survivorship policy is an investment because eventually the partnership will receive either the surrender value or the s

Analytical Procedures - Substantive tests of financial information that examine relationships among data as a means of obtaining evidence. Such procedures include: (1) comparison o

A Company policy calls for keeping safety-stock equal to 25% the forecasted demand for that month.  The company currently has a work force of 12 people.  It takes a worker 3 hours

Proposed dividends by subsidiary company If the subsidiary company has proposed some dividends appearing under current liabilities then the dividends are payable to the holding c

On January 1, 2014, Offshore Corporation erected a drilling platform at a cost of $5,420,142. Offshore is legally required to dismantle and remove the platform at the end of its 6

Purchased used truck for 8,000 ,paying 2,000 cash and the balance on account

Lower of Cost or Market - Valuing ASSETS for financial reporting purposes. Normally‘cost' is the purchase price of the asset and ‘market' refers to its current replacement cost. GE

Notsofast Inc. acquired land for $500,000 on 7/1/2010. It erroneously recorded the full amount as an expense. Explain what Notsofast must do when it discovers the error in 2011. Wh

Assume Mr. Ram deposits Rs. 10,000 annually in a bank for 5 years, at 10 percent compound interest rate. Compute the value of this series of deposits on the end of five years by as