Estimate the cost of capital for venice industrial

Assignment Help Financial Management

Reference no: EM131875432

You are an outside analyst attempting to estimate the cost of capital for Venice Industrial. You do not know the corporation's target capital structure. However, the balance sheet shows a total of $55 million of long term debt with a coupon rate of 8.50%. The yield to maturity is 10.50% (before tax) and the total current market value is $50 million. The balance sheets also show the total of common stock and retained earnings is $70 million. The company's stock has a beta of 1.70 and the stock price is $12.50 per share. There are 12 million shares of stock outstanding, and the current risk free rate is 3.50%. The company recently paid a dividend of $0.75, and they typically pay out about 25% of their earnings in cash dividends. Venice's return on equity is 10% and the expected return on the market is 9.50%. What is your estimate of VI's weighted average cost of capital if their marginal tax rate is 39%? (Be sure to consider all methods for the components costs if there is enough information).

Reference no: EM131875432

Questions Cloud

What is blue payout ratio : Assume that all balance sheet amounts represent average balance figures. Stockholders' equity-common 280000. What is Blue payout ratio

Describe the type of budget : Describe the type of budget you plan to implement in your company, and outline the budgeting review steps necessary to ensure that your company reaches.

How do you think the increases in the budget deficits : How do you think the increases in the budget deficits and the national debt will affect the economy in the future?

What is the stock intrinsic value : Assuming BBB’s cost of equity is 19.5%, what is the stock’s intrinsic value?

Estimate the cost of capital for venice industrial : You are an outside analyst attempting to estimate the cost of capital for Venice Industrial.

What is the meaning of renaissance humanism : Why does the author suggest that the Renaissance was a movement rather than a period? What is the significance of that distinction?

Purchased the mining rights for gold mine : The Black Mountain Mining Company has just purchased the mining rights for a gold mine for $150 million.

What is the amount of Mainstream MACRS deduction : Mainstream sold all of this equipment on June 30, 2015. What is the amount of Mainstream's MACRS deduction for 2015

How much is the effect on company total net operating income : How much is the "effect" (incremental net operating income) on the company's total net operating income through accepting the special order

User Account

All Pages