What is juniors weighted average cost of capital

Assignment Help Financial Management

Reference no: EM131496448

Junior Interiors market value capital structure of 62% Common Equity, 3% Preferred Stock (PS) and 35% Debt. The company does not pay dividends, and evaluates its operations as approximately 30% more risky than an “average” company in the industry. The overall rate of return on average industry investments is 8.4% and risk-free investments currently return 1.7%. Company Bonds sell for 97% of $2,000,000 Face value; carry a 6% annual interest rate with interest only payments made monthly. Currently outstanding debt obligations are due in 4 years. The firm’s PS has a current annual yield of 7.1%. It applicable tax rate is 32%.

1. What is Juniors Weighted Average Cost of Capital (WACC)?

2. If the regular PS dividend is $1.35 per quarter, for what does the stock currently sell?

3. A firm has a target Debt to Equity ratio of .85. It WACC is 10.2% and the applicable tax rate is 35%. If the company Cost of Equity is 13.4%, what is its PRE-TAX Cost of Debt?

4. Stock B has a Beta of 1.1 and an expected return of 12.3%. If the risk-free rate is 3.7% and MRP is 7%, is Stock B priced correctly?

Reference no: EM131496448

Questions Cloud

Select two hrm functions of both the home and host country : An introduction that includes the MNE's background about the relevant firm-specific factors and overview of what your assignment is about.

What are the two broad approaches to crm : Does the marketing orientation have advantages over product, production or sales philosophies?

Explain the reason for selecting given topic : Explain the reason for selecting topic one, identify the audience, and provide a preliminary thesis statement. Recognize the elements use of a thesis statement.

High scrap and rework for several years : A company that manufactures small household appliances has experienced high scrap and rework for several years.

What is juniors weighted average cost of capital : Junior Interiors market value capital structure of 62% Common Equity, 3% Preferred Stock (PS) and 35% Debt. What is Juniors Weighted Average Cost of Capital

What evidence is there of high or low levels of formality : Select an organisation with which you are familiar, or which you can find out about. Gather information about aspects of the structure, such as.

Which portfolio should be added to your current portfolio : You have $80,000 invested in portfolio C with expected return of 10% and standard deviation of 12%. which portfolio should be added to your current portfolio.

Define functional or a divisional structure : Go to the website of a company that interests you and gather information about the structure of the company.

A revised version of your introduction : A discussion of the types of secondary data you could use to test your hypothesis, and why this data would be useful.

User Account

All Pages