Find the weighted average cost of capital given the data

Assignment Help Financial Econometrics
Reference no: EM13329516

Company X is considering changing its capital structure in light of the tough business environment. Currently, Company X's total capital consists of:

$950 million in debt
$500 million of preferred stock
$900 million in common stock
$750 million in retained earnings

The debt coupon is 8% and tax rate is 40%, while the current preferred share price is $96.20 and the dividend per share is $9.

The company's common stock is trading at $25.50, its dividend payout this year is $1.15, and the growth rate of the dividend is 8.5%.

Find the weighted average cost of capital given the data above.

If Company X wants to change its capital structure (i.e., lower its WACC), what should it do?

Reference no: EM13329516

Questions Cloud

The cost of performing inspection sampling moves inversely : The cost of performing inspection sampling moves inversely to the cost of quality failures. We can reduce the cost of quality failures by increased levels of inspection, ut that of course would increase the cost of inspection. Can you think of any me..
Determine what is the value of the cost pool : The housekeeping services department of ABC Hospital had $250,000 in direct costs during 2006. these costs must be allocated to ABC's three revenue-producing patient services departments using the direct method.
Determine what is the effective interest rate on the loan : Holland Construction Co has an outstanding 180 day bank loan of $475,000 at an annual interest rate of 7.5%. The company is required to maintain a 15% compensating balance in its checking account.
What is stockholders equity for this company of total debt : A company has an equity multiplier of 2. What is stockholders' equity for this company if total debt is $100,000?
Find the weighted average cost of capital given the data : Company X is considering changing its capital structure in light of the tough business environment. Currently, Company X's total capital consists of: $950 million in debt
What would jodie have to earn at the end of year : Jodie earns 25,000 atthe end of year 1,when the CPI was 460. If the CPI at the end ofyear 2 is 504, what would Jodie have to earn at the end of year 2to maintain a constant real wage?What would she ahve to earn in year 2 to obtain a 5% increasein her..
At what rate is energy now dissipated : An unknown resistor is connected between the terminals of a 5.5 V battery. At what rate is energy now dissipated
The logistics challenges in some other industry : Describe how what was learned in this mass merchandising industry could be applied to the logistics challenges in some other industry.
At what rate is electrical energy transferred to heat : A 120 V potential difference is applied to a space heater whose resistance is 19 ? when hot. At what rate is electrical energy transferred to heat

Reviews

Write a Review

Financial Econometrics Questions & Answers

  What are the total state and federal unemployment taxes

Morris Leste, owner of Carlson Company, has three employees who earn $400, $500, and $700 per week. What are the total state and federal unemployment taxes that Morris owes for the first 11 weeks of the year and for week 30

  What is the minimum number of bonds the firm must sell

The MerryWeather Firm wants to raise $15 million to expand its business. To accomplish this, the firm plans to sell 10-year, $1,000 face value zero-coupon bonds. The bonds will be priced to yield 4 percent

  How to compute the required rate of return

Russo's Gas Distributor, Inc. wants to determine the required return on a stock with a beta coefficient of 0.5. Assuming the risk free rate of 6 percent and the market return of 12 percent.

  What would the nominal rate of interest on acme bonds

Inflation is expected to remain constant in the future at 3.3%. Default-risk premium is expected to remain constant at the rate of 1.8% . The liquidity risk is only 0.03% on the bonds.

  Find future fund for kelly at the beginning of each month

Find the future fund for Kelly, who is saving $350 at the beginning of each month for the next 4 years, if her savings account bears 7 1/2% interest compounded quarterly.

  Calculate total number of copies that publisher expects sell

Your finance text book sold 47,500 copies in its first year. The publishing company expects the sales to grow at a rate of 23.0 percent for the next three years, and by 6.0 percent in the fourth year.

  Determine what will the annual cash flow be

If you put up $51,000 today in exchange for a 6.25 percent, 15-year annuity, what will the annual cash flow be

  Find expected rate of return and standard deviation of bonds

You are considering an investment scenario where stocks will return -5% in a recession, +15% in a normal economy and +25% in a boom economy. Bonds will return +14% in a recession, +8% in a normal economy and +4% in a boom.

  What is a stock split

What is a cash, special, or stock dividend, what is a stock split and why is a liquidating dividend noteworthy?

  Construct a spreadsheet to calculate the payback period

Alma has used the estimates provided by Dan to determine the revenues that could be expected from the mine. She has also projected the expense of opening the mine and the annual operating expenses.

  What is the most which would be willing to pay for the stock

Metasteel Limited Co. has a stable sales track record but does not expect to grow in the next several years. Its last annual dividend was $5.75. If the required rate of return on similar investments is 18 percent

  What is the expected return on the firms equity

What is the expected return on the firm's equity before the announcement of the stock repurchase plan and what is the value of equity after the announcement of the stock repurchase plan?

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