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Filer Manufacturing has 8.3 million shares of common stock outstanding. The current share price is $53, and the book value per share is $4. Filer manufacturing also has two bond issues outstanding. The first bond issue has a face value of $70 million and a coupon rate of 7% and sells for 108.3% of par. The second issue has a face value of $60 million and a coupon rate of 7.5 % and sells for 108.9% of par. The first issue matures in 8 years, the second in 27 years. a) What are Filer’s capital structure weights on a book value basis? b) What are Filer’s capital structure weights on a market value basis? c) Which are more relevant, the book value of the market value weights? Why? d) Suppose the company’s stock has a beta of 1.2. The risk-free rate is 3.1%, and the market risk premium is 7%. Assume that the overall cost of debt is the weighted average implied by the two outstanding debt issues. Both bonds make semiannual payments and the tax rate is 35%. Given this information, what is the company’s WACC?
If the yield curve is downward sloping, which of the following statements is correct? (hint: graph the yield curves for a T- bond, a AAA bond, and a B bond)
The following is from Harrlson Incs financial statements. Sales (all on credit)were $28.50 millions for 2013 Sales to total assets 1.90 times Total Debt to Total Assets 35% Current Ratio 2.50 times Inventory Turnover 20 days Average Collection period..
Assume you have a subsidiary in Australia. The subsidiary sells mobile homes to local consumers in Australia, who buy the homes using mostly borrowed funds from local banks. Your subsidiary purchases all of its materials from Hong Kong. Explain wheth..
National Trucking has paid an annual dividend of $1.00 per share on its common stock for the past fifteen years and is expected to continue paying a dollar a share long into the future.
(a) How many gallons would be sold per hour if the price is $2.45 per gallon? Answer: _________ (b) What must the gasoline price be in order to sell 1300 gallons per hour? Answer: $ _________
Given the following information for Bellevue Power Co, find the WACC. Assume the company's tax rate is 35 percent. Debt: 5,000. 7% coupon bonds outstanding, $ 1000 par value, 20 years to maturity, selling for 92 percent of par; bonds make semi annual..
Image your small business that produces very small remote control aircraft capable of long sustained flights. You are ready to expand your business by competing for Department of Defense (DoD) contracts.
Calculate the WACC based on the following information. Assume tax rate is 35%. Debt: $10M face value, current price $10.8M, 6.4% coupon rate, 25 years to maturity, semiannual coupon payment. (Hint: cost of debt is YTM of the bond) Equity: 495,000 sha..
Based on what I have read in this week’s chapter I would have to say Net Present Value is something we use at my job. My company decided to analyze the predicted profitability of one of its projects. In order to do so it had an initial cost of $10,00..
What is meant by the "cost of capital", as the term pertains to common shareholders' equity? We can easily determine the cost of debt, which is the stated rate multiplied by one minus the marginal tax rate; and the cost of preferred stock is usually ..
Brighton Corp. bought an oil rig exactly 6 years ago for $119,000,000. Brighton depreciates oil rigs straight line over 10 years assuming no salvage value. (Straight line depreciation means that the yearly depreciation will be the purchase price of t..
The BA720 Company has $15 million in pretax income, a tax rate of 30%, and a capital structure mix that is comprised of 78% in equity and 22% million in long term debt [market value basis]. The cost of debt is 9% and cost of equity is 12%. a) What is..
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