Weighted average of that implied by outstanding debt issues

Assignment Help Financial Management
Reference no: EM131084276

Filer Manufacturing has 8 million shares of common stock outstanding. The current share price is $80, and the book value per share is $7. Filer Manufacturing also has two bond issues outstanding. The first bond issue has a face value of $75 million, has a 9 percent coupon, and sells for 95 percent of par. The second issue has a face value of $45 million, has a 10 percent coupon, and sells for 108 percent of par. The first issue matures in 24 years, the second in 7 years. The most recent dividend was $5.2 and the dividend growth rate is 8 percent. Assume that the overall cost of debt is the weighted average of that implied by the two outstanding debt issues. Both bonds make semiannual payments. The tax rate is 34 percent. Required: What is the company's WACC? (Do not round your intermediate calculations.)

13.6%

9.53%

8.46%

17.99%

 

9%

Reference no: EM131084276

Previous Q& A

  Workplace or social context

In a five to six sentence paragraph provide an example of how to effectively deal with a difficult person in either a workplace or social context.

  Least-expensive car for new delivery service

You are trying to pick the least-expensive car for your new delivery service. You have two choices: the Scion xA, which will cost $21,500 to purchase and which will have OCF of –$2,700 annually throughout the vehicle’s expected life of three years as..

  What price per jar would project NPV equal zero

Emperor’s Clothes Fashions can invest $6 million in a new plant for producing invisible makeup. The plant has an expected life of 5 years, and expected sales are 7 million jars of makeup a year. Fixed costs are $2.5 million a year, and variable costs..

  What is the effective annual interest rate

A pay day loan is structured to obscure the true rate you are paying. For example, in Washington, you pay a $31 "fee" for a two-week $180 loan (when you repay the loan, you pay $211). What is the effective annual interest rate for this loan? Assume 2..

  About the future value

Calculate how much you would have in 10 years if you saved $3,500 a year at an annual rate of 6 percent with the company contributing $875 a year. Use Exhibit 1-B.

  What is the dollar-cost of debt

A U.S. based company borrowed £10 Million from the only willing lender: a British bank. The loan will be repaid in £ in one year, with 19% interest. The exchange rate at the time the loan was made was 0.64 £ per $. What is the dollar-cost of debt? (t..

  How many ways can four distinct points be arranged in plane

Four Points, Two Distances. How many ways can four distinct points be arranged in the plane so that the six distances between pairs of points take on only two different values

  Investment strategy using european options

Consider the following investment strategy using European options on Ford that expire in July. Write one call option with an exercise price of $ 170 (X=$170) currently priced at $10 Write another call option with an exercise price of $ 195 (X=$195) p..

  Hedge the exchange rate risk of the company

A Brazilian refinery exported many tons of sugar to the U.S. and hence its profitability relies on a low exchange rate of U.S. dollars per Brazilian real (currently US$0.3315/R$). Explain why buying the call option above can help hedge the exchange r..

  Using profitability index when evaluating projects

Gold Mining, Inc. is using the profitability index (PI) when evaluating projects. Gold Mining’s cost of capital is 5.41 percent. What is the PI of a project if the initial costs are $2,457,480 and the project life is estimated as 5 years? The project..

Reviews

Write a Review

 

Similar Q& A

  About the risk averse

If you are risk averse, you should choose an asset allocation that is:

  What is the internal rate of return of the project

What is the internal rate of return of the following project if the required rate of return is 15%? The initial investment is $175,000. Note: Can you please show me how to do this? I am having trouble following along with the instructions.

  Find the face value of the bond

An investor owns a $3000 par-value 12% bond with semiannual coupons. The bond will mature at par at the end of fourteen years. The investor decides that a ten-year bond would be preferable. Current yield rates are 6% convertible semiannually. The inv..

  Should dickson city introduce the policy of credit sales

Dickson City Company has annual sales of $5 million, while the cost of goods sold is $3.2 million. All sales are made on a cash basis. The owner of Dickson has come up with the plan of giving credit to the customers. Should Dickson City introduce the..

  Explain how banks move loans off the balance sheet

Explain how banks move loans off the balance sheet. What motivates different types of off balance sheet activities? Discuss the risks these actions involve.

  Define what is the coupon rate for a bond

What is the coupon rate for a bond (face value $1,000) with five years until maturity, a price of $957.88, and a yield to maturity of 6%? What is the current yield for this bond?

  Calculate the initial outlay of the project

FITCO Inc. is a Pharmaceutical company which is considering investing in a new equipment for the production of pain-reliever machine for individuals who suffer from cardio vascular diseases. Calculate the initial outlay of the project. Calculate the ..

  Deposit a regular amount every three months until he retires

A man is planning to retire in 25 years. He wishes to deposit a regular amount every three months until he retires, so that, beginning one year following his retirement, he will receive annual payments of $60,000 for the next 10 years. How much must ..

  Income statement showed depreciation expense-net capital

Rotweiler Obedience School’s December 31, 2013, balance sheet showed net fixed assets of $1,785,000, and the December 31, 2014, balance sheet showed net fixed assets of $2,160,000. The company’s 2014 income statement showed a depreciation expense of ..

  Compute the comparable financial ratios for next fiscal year

An analysis of last year's financial statements produced the following results. Use the following data to compute the comparable financial ratios for next fiscal year. Has the firm's financial position changed?

  Consist entirely of current assets-net plant and equipment

The assets of Dallas & Assoc. consist entirely of current assets and net plant and equipment. The firm has total assets of $ 2,606,694 and net plant and equipment of $ 1,103,618. The company has notes payable of $ 140,331, long-term debt of $ 823,770..

  What is the required return on the companys stock

Keenan Co. is expected to maintain a constant 4.6 percent growth rate in its dividends indefinitely. If the company has a dividend yield of 6.4 percent, what is the required return on the company’s stock?

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