What is firm weighted average cost of capital

Assignment Help Financial Management

Reference no: EM131356102

Jemisen's firm has expected earnings before interest and taxes of $1,400. Its unlevered cost of capital is 12 percent and its tax rate is 34 percent. The firm has debt with both a book and a face value of $2,100. This debt has an 8 percent coupon and pays interest annually. What is the firm's weighted average cost of capital?

a) 11.04 percent

b)11.51 percent

c) 11.89 percent

d) 10.98 percent

e) 11.21 percent

Reference no: EM131356102

Questions Cloud

Cash flows that are uncorrelated with spot exchange rates : You work for a U.S.? firm, and your boss has asked you to estimate the cost of capital for countries using the euro. You know that S = $1.2467/€ and F1=$1.1615/€. Suppose the dollar WACC for your company is known to be 7.6%. If these markets are inte..

Statement about perception towards investment : Which is a better statement about perception towards investment now? It is a good time to take a risk, thus invest more in stocks. Due to uncertainties, it is a good idea to increase cash holdings instead of stocks.

Expected return of the minimum variance portfolio : The stock of Bruin, Inc., has an expected return of 22 percent and a standard deviation of 35 percent. The stock of Wildcat Co. has an expected return of 14 percent and a standard deviation of 40 percent. The correlation between the two stocks is .40..

Expected return and standard deviation of portfolio : The expected return and standard deviation of a portfolio that is 50 percent invested in 3 Doors, Inc., and 50 percent invested in Down Co. are the following: 3 Doors, Inc. Down Co. Expected return, E(R) 19 % 11 % Standard deviation, σ 52 41 What is ..

What is firm weighted average cost of capital : Jemisen's firm has expected earnings before interest and taxes of $1,400. Its unlevered cost of capital is 12 percent and its tax rate is 34 percent. The firm has debt with both a book and a face value of $2,100. This debt has an 8 percent coupon and..

What is the ex-rights stock price and price of one right : A company’s stock currently sells for $93 per share. Last week the firm issued rights to raise new equity. To purchase a new share, a stockholder must remit $31 and 3 rights. What is the ex-rights stock price? What is the price of one right?

Borrow money by issuing perpetual bonds with coupon rate : Williams Industries has decided to borrow money by issuing perpetual bonds with a coupon rate of 8.5 percent, payable annually. The one-year interest rate is 8.5 percent. What will the market value of these bonds be if they are noncallable? What will..

What would be the weight used for equity in computation : JackITs has 6.6 million shares of common stock outstanding, 2.6 million shares of preferred stock outstanding, and 36.00 thousand bonds. If the common shares are selling for $29.70 per share, the preferred share are selling for $15.10 per share, and ..

Four shares of outstanding stock : Valley Corp.'s stock is currently selling at $33 per share. There are 1 million shares outstanding. The firm is planning to raise $2 million to finance a new project. Four shares of outstanding stock are entitled to purchase one additional share of t..

User Account

All Pages