Use for the debt in order to compute the firm wacc

Assignment Help Financial Management

Reference no: EM131931883

1. A company has 1,000,000 shares of common stock outstanding and its stock is currently trading at $50 per share. The firm also has 20,000 bonds outstanding. The bonds are quoted at 116%(?) of face value. What weight should we use for the debt in order to compute the firm's WACC?

a. 27.5%

b. 31.7%

c. 29.2%

d. 33.9%

e. 36.3%

2. Why does Shapiro argue that board members should not be outsiders?

A-Outsiders would be easily manipulated by the CEO

B-Outsiders would be more impartial

C- Outsiders might sell the company out to another company

D- Outsiders might have conflicts of interest

Reference no: EM131931883

Questions Cloud

Constraint the payments of dividends : What are the 3 variables that can constraint the payments of dividends?

What would be holding period return for the investor : Assume that the yield to maturity falls to 7% after one year, and the investor decides to sell the bond. What would be holding period return for the investor?

What is estimate of the stock current price : The company's stock has a beta of 1.2, the risk-free rate is 7.5%, and the market risk premium is 4%. What is your estimate of the stock's current price?

Purchase call option costing : Assume that you purchase a call option costing $10/share which would allow you to purchase 100 shares of stock at a strike price of $90.

Use for the debt in order to compute the firm wacc : Why does Shapiro argue that board members should not be outsiders? What weight should we use for the debt in order to compute the firm's WACC?

What would be your percentage return on investment : What would be your percentage return on investment if you bought when rates were 12 percent and sold when rates were 4 percent?

Company stock price is going to decline from current level : Suppose you believe that Ace Company's stock price is going to decline from its current level of $80.50 sometime during the next 5 months.

What is the after-tax cost of debt for bonds : If investors are willing to pay $1,025 for each of the bonds, what is the after-tax cost of debt for bonds?

What is the percentage price change of bonds : If interest rates suddenly rise by 2.2 percent, what is the percentage price change of these bonds?

User Account

All Pages