What is the weighted average cost of capital

Assignment Help Finance Basics
Reference no: EM131597076

A company you are researching has common stock with a beta of 1.51. Currently, Treasury bills yield 3%, and the market portfolio offers an expected return of 12%. The company finances 40% of its assets with debt that has a yield to maturity of 6%. The firm also uses preferred stock to finance 10% of its assets. The preferred stock has a current price of $12 per share and pays a level $1 dividend. The firm is in the 35% tax bracket. What is the weighted average cost of capital?

Answer = 10.69%.

Can you show how to get this answer.

Reference no: EM131597076

Questions Cloud

Career development at electronic applications : Electronic Applications Corporation is a major producer of silicon chips for the computer industry. It is located southeast of San Francisco in an area.
Calculate the taxable equivalent yield : Assume you are in the 20 percent tax bracket and purchase a 5.8 percent municipal bond.
Operational and strategic planning in healthcare : Pay-For-Performance Incentives: Based on your prior analysis of the impact of case rates and management utilization data on pay-for-performance incentives
Type of issues-harassment or discrimination allegation : Examples of the type of issues include harassment or discrimination allegation, nepotism in recruitment, whistleblower complaint, and workers' compensation.
What is the weighted average cost of capital : The preferred stock has a current price of $12 per share and pays a level $1 dividend. The firm is in the 35% tax bracket.
Minimize its expected financing cost : what is the highest interest rate it should be willing to pay to borrow euro, assuming it is trying to minimize its expected financing cost?
Describe your current leadership style : Describe your current leadership style including interpersonal skills that are strengths, as well as frequent/infrequent behaviors in your current role.
Should the company undertake the investment : Should the company undertake the investment? If so, should it purchase or lease the plant?
What is financial value : What is financial value? Where does it come from? How is it converted into a return?

Reviews

Write a Review

Finance Basics Questions & Answers

  Good diversification in a portfolio investment

What makes for good diversification in a portfolio investment? How do you achieve diversification?

  Discussion-supply chain

Understanding supply chain and how the consumer can play a critical role in the supply chain is an important part of developing and implementing a strategy. There are many products and services today where the target customer is part of the supply..

  How many shares of stock will you own

At what price would you expect the stock to sell on April 2, all other things the same (no signaling effect)? What will be the total value of your holdings before and after the stock dividend, all other things the same?

  Head of sales for a relatively small company

You are the head of sales for a relatively small company. You have just received a massive order for parts/supplies/services.

  Describe the overall planning process and the likely

1.determine what your selected organization would need to take into account when making pricing and service

  Provide information on the board and management structure

Provide information on the board and management structure and critically comment on these with regards to corporate governance matters

  The social security administration

The Social Security Administration has several benefit calculators available on its Web site. The "Quick Calculator" will give you a rough estimate of your retirement benefits. Benefit estimates depend on your date of birth and earnings history.

  Determining the unamortized discount

A portion of the proceeds was used to call the 11% bonds (with unamortized discount of $190,200) at 103 on August 1.

  In october 2012 average house price in the united states

in october 2012 the average house price in the united states was 223500. in october 2003 the average price was 285000.

  What is the dollar amount of taxes paid

Selling and administrative expenses were 10 percent of sales. Depreciation expense was $18,000 and interest expense for the year was $9,000. The firm's tax rate is 27 percent. What is the dollar amount of taxes paid?

  What would be the weight used for equity in the computation

What would be the weight used for equity in the computation of FarCry's WACC?

  Describe the effects of changing parameter values

Explore the financial functions that are available in a spreadsheet. Check the calculations in this chapter and describe the effects of changing parameter values. What assumptions do the functions make? What improvements would you like?

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