What is the weighted average cost of capital

Assignment Help Financial Management
Reference no: EM13950025

Delta Lighting has 30,000 shares of common stock outstanding at a market price of $15 a share. This stock was originally issued at $31 per share. The firm also has a bond issue outstanding with a total face value of $280,000 which is selling for 86 percent of par. The cost of equity is 13 percent while the aftertax cost of debt is 6.9 percent. The firm has a beta of 1.48 and a tax rate of 30 percent. What is the weighted average cost of capital?

Reference no: EM13950025

Questions Cloud

Decrease the credit period : Which of the following will decrease the credit period? I. Increase in the buyer's inventory period II. Increase in the buyer's operating cycle III. Decrease in the buyer's inventory cycle IV. Decrease in the buyer's operating cycle
What is the cost of equity for a firm that has a beta : What is the cost of equity for a firm that has a beta of 0.98, a dividend growth rate of 3.2%, a stock price of $33/share, and an expected annual dividend of $1.06 per share next year? The market rate of return is 11.2% and the risk-free rate is 3.7%..
Nalyzing a project with the cash flows : Blue water system is analyzing a project with the following cash flows. use the reinvestment approach and calculate the modified internal rate or return if the discount rate is 15%?
How much of the first payment is interest : A person will buy a $250,000 home paying 20% down and financing the rest at the annual interest rate of 7% compounded monthly. He will make monthly payments for 30 years to pay off the loan. Find the monthly payment. How much of the first payment is ..
What is the weighted average cost of capital : Delta Lighting has 30,000 shares of common stock outstanding at a market price of $15 a share. This stock was originally issued at $31 per share. The firm also has a bond issue outstanding with a total face value of $280,000 which is selling for 86 p..
Compute the wac breakpoint associated with raising new funds : Emma Inc.’s capital structure consists of 30 percent debt and 70 percent common equity. According to its investment banker, Emma Inc. can issue up to $240,000 new debt at a 3.8 percent cost; for any amount of new debt greater than $240,000, the cost ..
Insurance contracts have distinct legal characteristics : Insurance contracts have distinct legal characteristics that make them different from other legal contracts. Identify and discuss other distinct legal characteristics which are found in insurance contracts. Define and contrast the legal relationships..
Calculate the profits for the arbitrage strategy : Ms. Chambers, a U.S. arbitrageur, is looking for arbitrage opportunities after interest rate changes. The available funds for arbitrage is $5,000,000. The spot exchange rate (Kr/USD) is 6.1720; 3 month forward rate (Kr/USD) 6.1980. If arbitrage is po..
Operating cash inflows generated by the replacement : A new machine with an installed cost of $85,000. Sale of the old machine will yield $30,000 after taxes. Operating cash inflows generated by the replacement will exceed the operating cash inflows of the old machine by $20,000 in each year of a 6-year..

Reviews

Write a Review

Financial Management Questions & Answers

  One is an ordinary annuity and the other is an annuity due

You are evaluating two annuities. They are identical in every way except that one is an ordinary annuity and the other is an annuity due. Which of the following is FALSE?

  Maturity risk premium

The real risk-free rate is 3%, and inflation is expected to be 4% for the next 2 years. A 2-year Treasury security yields 8.4%. What is the maturity risk premium for the 2-year security?

  Compute the marginal cost of capital schedule for ml

Matsumoto Limited (ML), a large conglomerate firm. Compute the marginal cost of capital schedule for ML, and determine the break points in the schedule.

  The third of the primary principles of finance is known as

the third of the primary principles of finance is known as valuation. this principle brings together the two other

  What are arithmetic and geometric average returns for stock

What are the arithmetic and geometric average returns for a stock with annual returns of 21 percent, 9 percent, –2 percent, and 13 percent? List the arithmetic answer first.

  How many years will you make payments on the loan

You borrowed $700 at 5% compounded quarterly. Your payments are $150 at the end of each year. How many years will you make payments on the loan?

  Marginal-average tax rate paid for firm with taxable income

What is the (1) marginal and (2) average tax rate paid for a firm with taxable income of a). $25,000? b). $85,000? c). $250,000? d). $12 million? e). $200 million?

  What is the pretax required return on gordons stock

The Gecko Company and the Gordon Company are two firms whose business risk is the same but that have different dividend policies. Gecko pays no dividend, whereas Gordon has an expected dividend yield of 2 percent. What is the pretax required return o..

  Manufacturing plant and equipment to actually produce stamps

Consider a project to supply 118 million postage stamps per year to the U.S. Postal Service for the next five years. You have an idle parcel of land available that cost $2,080,000 five years ago;You will need to install $5.58 million in new manufactu..

  New divisor for the price-weighted index

Able, Baker, and Charlie are the only three stocks in an index. The stocks sell for $57, $315, and $114, respectively. If Baker undergoes a 3-for-2 stock split, what is the new divisor for the price-weighted index?

  Calculate bond equivalent yield and effective annual return

Calculate the bond equivalent yield and effective annual return on a jumbo CD that is 115 days from maturity and has a quoted nominal yield of 6.62 percent.

  Understand product value and the competitive environment

In this assignment you will write a blog about research tools that can help a marketer understand product value and the competitive environment.

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