What is the companys weighted average cost of capital

Assignment Help Financial Management

Reference no: EM13924916

Using the information from the two previous problems, what is the Capital Structure mix on a dollar value basis for the BA707 and AB300 companies?

(Previous Problem - 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 the company’s weighted average cost of capital?

b) What is the value of the company?

The AB300 Company is identical to the BA720 Company (information in previous problem) in every respect save two: it is debt free and its cost of equity is 11.5%.

a) What is the value of the AB300 Company?

b) Explain the difference in values for AB300 versus BA320.)

Reference no: EM13924916

Questions Cloud

How does the russian market play a role in these differences : Read the case study, Emerging Markets: Amazon.com of Russia. (attached) What are some of the major differences between Ozon.ru and Amazon.com, and how does the Russian market play a role in these differences

Wan relies on the internet provider : The WAN relies on the Internet provider (Comcast) for all of the TCP/IP configuration and uses DHCP servers to assign local addresses to the computers.

How does the merton model explain migration risks : Explain migration risk. How does the Merton Model explain migration risks? How would you compute economic capital for a credit portfolio?

University health system has three divisions : University Health System has three divisions: Real Estate, with an 8 percent cost of capital; Health Services, with a 10 percent cost of capital; and Managed Care, with a 12 percent cost of capital. The system’s risk adjustment procedures call for ad..

What is the companys weighted average cost of capital : Using the information from the two previous problems, what is the Capital Structure mix on a dollar value basis for the BA707 and AB300 companies? What is the company’s weighted average cost of capital? What is the value of the company? What is the v..

Confidence interval is constructed-population mean revenue : The daily revenue from the sale of fried dough at a local street vendor in Boston is known to be normally distributed with a known standard deviation of $120. The revenue on each of the last 25 days is noted, and the average is computed as $550. A 95..

What approach firefighters might use to fight fire : Ethanol Fires can be difficult to extinguish. Discuss why this is true and what approach firefighters might use to fight this type of fire.

Give an introductory background on your organization : Give an introductory background on your organization. Research the direction of monetary policy over the last 3-5 years. Describe the impact of these monetary policies on your team's selected organization

Explain how effective firm credit risk analysis : Explain how effective firm credit risk analysis and portfolio risk analysis ensure efficient credit risk management. Theoretical Bank Ltd is conducting credit risk analysis of two new customers (i) XYZ & Co Ltd and (ii) ABCD & Co Ltd.

User Account

All Pages