Calculate weighted average cost of capital

Assignment Help Financial Management
Reference no: EM131891497

ABC would like to expand and have a capital structure of:

10 million preferred stock

30 million debt

60 million common equity

ABC would like to expand, in order to do so they must issue new debt with a 12% coupon rate, $1,000 par value, that have 15 year maturities.  The floatation costs are 2% per bond.  

Preferred stock will cost ABC 11% after taxes.

ABC's common stock currently sells for $22 a share and next year will pay a quarterly dividend of $0.25 per share. If the stock dividends are expected to continue to grow at a rate of 4% per year for the foreseeable future.  

ABC's tax rate is 35%.

Calculate the weighted average cost of capital.

Reference no: EM131891497

Questions Cloud

Find year one net cash flow : Find year one net cash flow. Find year two net cash flow. Find year three net cash flow. Find year four net cash flow. Find year five net cash flow.
Find the marginal cost of preferred stock : ABC's common stock currently sells for $22 a share and next year will pay a quarterly dividend of $0.25 per share. Find the marginal cost of preferred stock.
Types of investments over the previous three decades : Suppose you gathered the following return data on these types of investments over the previous three decades:
Find the marginal cost of equity : ABC's tax rate is 35%. Find the marginal cost of equity.
Calculate weighted average cost of capital : ABC would like to expand and have a capital structure of. Calculate the weighted average cost of capital.
Estimate present value of tax benefits from depreciation : Estimate the present value of the tax benefits from depreciation.
Difference in percentage changes in prices of bond : If interest rates suddenly rise by 2 percentage points, what is the difference in percentage changes in prices of Bond A and Bond B?
Find the present value of the firm in dollars : Assuming a discount rate of 19%, find the present value (at Year 0) of the firm in dollars.
What was the total percentage return on shank stock : What was the total percentage return on Shank's stock during the third year?

Reviews

Write a Review

Financial Management Questions & Answers

  How long does sam have before he will retire

Sam refuses to retire until his retirement account has a balance of at least $ 403,806 . Sam refuses to make any more deposits in the account. The account currently has a balance of $ 147,092 and earns 6% per year, compounded semi-annually. How long ..

  How do agents and brokers differ

How do agents and brokers differ? After hearing the advice that it is usually best to buy life insurance from a person who has been in the business at least five years, a life insurance company general agent became upset and said rather vehemently, “..

  Find the net change in the value of the company

Find the net change in the value of the company due to the financial restructuring.

  Foreign exchange futures pricing

Foreign Exchange (FX) Futures pricing. Compute the 180-day US/MP futures price. What should be the current BP/MP spot exchange rate (or cross rate)?

  Purpose of the discussion is preparing recommendations

Recruiting new employees Imagine that you are the employees of company "ABC" and you work in one departrment ou can choose what kind of department. The purpose of the discussion is preparing the recommendations for the company executive how to improv..

  Currently operating at full capacity-current assets

Urban's which is currently operating at full capacity, has sales of $47,000, current assets of $5,100, current liabilities of $6,200, net fixed assets of $51,500, and a 5 percent profit margin. The firm has no long-term debt and does not plan on acqu..

  What is price per share of the company stock

What is the price per share of the company's stock?

  For the sake of illustration

For the sake of illustration, consider a situation where RestLife holds a $120 MM face value position with an IR DV01 of 73,828.09 and SPRD DV01 of 95,908.09. What position in an IRS and a CDS should be held if the IR DV01 and SPRD DV01 of $10 MM not..

  Capital asset pricing model is extensively tested models

The Capital Asset Pricing Model (CAPM) is one of the most extensively tested models in finance.

  Chief harm-based arguments against insider trading

Explain the two chief harm-based arguments against insider trading. What does Jennifer Moore say about these arguments? Can you identify another problem with either argument?

  Taxes and depreciation impact income and cash flows

How does taxes and depreciation impact income and cash flows? Post an exercise that illustrates how to compute operating cash flows.

  What is the return assuming no margin

Assume 5% annual interest rate on the margin. What is the return assuming no margin?

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