Shares outstanding and long-term debt outstanding

Assignment Help Financial Management

Reference no: EM131530128

Acort Industries has 5 million shares outstanding and a current share price of $38 per share. It also has? long-term debt outstanding. This debt is risk? free, is four years away from? maturity, has an annual coupon rate of 11%?, and has a $104 million face value. The first of the remaining coupon payments will be due in exactly one year. The riskless interest rates for all maturities are constant at 6.6%. Acort has EBIT of $112 ?million, which is expected to remain constant each year. New capital expenditures are expected to equal depreciation and equal $17 million per? year, while no changes to net working capital are expected in the future. The corporate tax rate is 45%?, and Acort is expected to keep its? debt-equity ratio constant in the future? (by either issuing additional new debt or buying back some debt as time goes? on).

a. Based on this? information, estimate? Acort's WACC. The WACC is _______?%. ? (Round to two decimal? places.)

b. What is? Acort's equity cost of? capital? The equity cost of capital is _______%. ?(Round to two decimal? places.)

Reference no: EM131530128

Questions Cloud

Explain the meaning of estimation in distributed lag form : Explain the meaning of each of the following terms. Adaptive expectations, Regressive expectations.

How would floatation costs impact the wacc : How would "floatation costs" impact the WACC? What are some of the advantages and disadvantages of raising capital by using debt?

What is the error correction models : What are the problems one encounters in the OLS estimation under adaptive expectations in the following models?

Find three careers in finance that you are interested : Using various employment websites (i.e. Monster, Indeed, USAjobs) find three careers in finance that you are interested in applying to.

Shares outstanding and long-term debt outstanding : Acort Industries has 5 million shares outstanding and a current share price of $38 per share. It also has? long-term debt outstanding.

What is meant by the given phrase : What is meant by the phrase: "The estimator is invariant to normalization"? Do any problems arise if an estimator is not invariant to normalization?

Conduct an initial review of the simulated workplace : Conduct an initial review of the simulated workplace, including core elements of the system organisational requirements for WHS management

Discuss the identification of each of the equations of model : Discuss the identification of each of the equations of the model, based on the order and rank conditions. Now suppose that you want to estimate the first.

Define the term test : Summarize the major assumptions and fundamental questions associated with psychological testing.Define the term test.

User Account

All Pages