User Account

All Pages

What is Micro Advantage weighted-average cost of capital

Assignment Help Accounting Basics
Reference no: EM132425836

Question - Below is information regarding the capital structure of Micro Advantage Inc. On the basis of this information you are asked to respond to the following three questions:

Required -

1. Micro Advantage issued a $5,400,000 par value, 18-year bond a year ago at 97 (i.e. 97% of par value) with a stated rate of 9%. Today, the bond is selling at 110 (i.e. 110% of par value). If the firm's tax bracket is 35%, what is the current after-tax cost of this debt?

2. Micro Advantage has $5,400,000 preferred stock outstanding that it sold for $24 per share. The preferred stock has a per share par value of $23 and pays a $3 dividend per year. The current market price is $28 per share. The firm's tax bracket is 27%. What is the after-tax cost of the preferred stock?

3. In addition to the bonds and preferred stock described in requirements 1 and 2, Micro Advantage has 53,000 shares of common stock outstanding that has a par value of $10 per share and a current market price of $150 per share. The expected after-tax market return on the firm's common equity is 15%. What is Micro Advantage's weighted-average cost of capital (WACC)?

Reference no: EM132425836

Questions Cloud

Create at least three actual strategic goals : Create at least three actual strategic goals for your own health care organization or department or one which you someday hope to lead.
What will be the total impact of the salaries paid : What will be the total impact of the salaries paid on the company's balance sheet other than a decrease in cash of $5,000
Determine the cash payback period for each proposal : Project A as well as project B require an initial investment of $1,050,000, have a 6-year life, Determine the cash payback period for each proposal
Apply appropriate project management tools and techniques : Critically reflect on the leadership styles necessary to succeed in a range of project management situations, and their personal capacity to succeed in those
What is Micro Advantage weighted-average cost of capital : The expected after-tax market return on the firm's common equity is 15%. What is Micro Advantage's weighted-average cost of capital (WACC)
Determine the necessary average annual income : Determine the necessary average annual income (using straight-line depreciation) that must be achieved on this project for it to be acceptable to Harris Co
Determine the net present value : The present value of $1 at compound interest of 12% for 1, 2, 3, and 4 years is 0.893, 0.797, 0.712, and 0.636, respectively. Determine the net present value
Difference between modifiers used for hospital outpatients : Discuss the difference between modifiers used for hospital outpatients versus modifiers for physicians. Why are they used?
Calculate the log returns and the excess return : Create a graph of the Security Market line - What does the SML graph tell you about the mean-beta relationship and Discuss your regression results.

Reviews

Write a Review

Accounting Basics Questions & Answers

  How much control does fed have over this longer real rate

Hubbard argues that the Fed can control the Fed funds rate, but the interest rate that is important for the economy is a longer-term real rate of interest.   How much control does the Fed have over this longer real rate?

  Coures:- fundamental accounting principles

Coures:- Fundamental Accounting Principles: - Explain the goals and uses of special journals.

  Accounting problems

Accounting problems,  Draw a detailed timeline incorporating the dividends, calculate    the exact Payback Period  b)   the discounted Payback Period. the IRR,  the NPV, the Profitability Index.

  Theory of interest - term structure of interest rates

Term Structure of Interest Rates

  Write a report on internal controls

Write a report on Internal Controls

  Prepare the bank reconciliation for company

Prepare the bank reconciliation for company.

  Cost-benefit analysis

Create a cost-benefit analysis to evaluate the project

  Theory of interest

Theory of Interest: NPV, IRR, Nominal and Real, Amortization, Sinking Fund, TWRR, DWRR

  Liquidity and profitability

Distinguish between liquidity and profitability.

  What is the expected risk premium on the portfolio

Your Corp, Inc. has a corporate tax rate of 35%. Please calculate their after tax cost of debt expressed as a percentage. Your Corp, Inc. has several outstanding bond issues all of which require semiannual interest payments.

  Simple interest and compound interest

Simple Interest, Compound interest, discount rate, force of interest, AV, PV

  Capm and venture capital

CAPM and Venture Capital

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +91-977-207-8620

Phone: +91-977-207-8620

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd