What is the weighted average cost of capital for firm

Assignment Help Financial Management
Reference no: EM131088165

WACC The current stock price for a company is $38 per share, and there are 4 million shares outstanding. The beta for this firms stock is 1, the risk-free rate is 4.2, and the expected market risk premium is 6%. This firm also has 90,000 bonds outstanding, which pay interest semiannually. These bonds have a coupon interest rate of 9%, 22 years to maturity, a face value of $1000, and a current price of 1,063.64. If the corporate tax rate is 36%, what is the weighted average cost of capital for this firm (WACC)?

Reference no: EM131088165

Questions Cloud

Diversity in organizations from a global perspective : Please submit the final paper using appropriate APA Format in no less than six pages with a minimum of four quality acceptable academic references to support the content citations. The paper must include an abstract which summarizes the paper this..
The split has no effect on the total market value of equity : JPix management is considering a stock split. JPix currently sells for $100 per share, and a 3-for-1 stock split is contemplated. What will be the company's stock price following the stock split assuming that the split has no effect on the total mark..
The characteristics of the composition : write 2 pages paper that answers the question: (sample sentence)- what is an academic paper?consider the following:- who is the author? the audience?-what are the characteristics of the composition?-what are the characteristics of the paper's mess..
Check whether the statement is true or false : Increasing-returns Trade Theory says that nations with negligible differences in comparative-advantage have no basis for trade even if they can take advantage of massive economies of scale
What is the weighted average cost of capital for firm : WACC The current stock price for a company is $38 per share, and there are 4 million shares outstanding. The beta for this firms stock is 1, the risk-free rate is 4.2, and the expected market risk premium is 6%. If the corporate tax rate is 36%, what..
Number of workers required in supermarkets : Explain two reasons why the number of workers required in supermarkets has reduced over the past 20 years.
The semi-developed economies in the world : Emerging markets refer to those markets that are the semi-developed economies in the world. These economies show some characteristics of the developed markets but do not meet the standards of a fully developed economy. These are basically the mark..
European option struck at-the-money : All Black-Scholes assumptions hold. Assume no dividends. The stock price is 100. The riskless interest rate is 5% per annum. Consider a 1-year European option struck at-the-money (i.e. strike equal current spot). If the volatility is zero (i.e. σ = 0..
Investment plan and debt security markets : Develop a strategic plan for investing excess funds that a corporation currently has available. Evaluate investment options available, demonstrating an understanding of various types of investments.

Reviews

Write a Review

Financial Management Questions & Answers

  At what price should the annual payment bond sell

McCurdy Co.'s Class Q bonds have a 12-year maturity, $1,000 par value, and a 5.25% coupon paid semi annually (2.625% each 6 months), and those bonds sell at their par value. McCurdy's Class P bonds have the same risk, maturity, and par value, but the..

  Construct the base case projected

Grandview Clinic has fixed costs of $2 million and an average variable cost rate of $15 per visit. Its sole payer, and HMO, has proposed an annual capitation payment of $150 for each of its 20,000 members. Past experience indicates that the populatio..

  Reduce industry profitability

Which of the following tends to reduce industry profitability?

  MM extension with growth-what is value of equity

According to the MM extension with growth, what is Kitto's value of equity?

  1 suppose that there are two calls on the same stock one

1. suppose that there are two calls on the same stock one with exercise price k of 30 the other 35. the market value

  With no corresponding increase in current liabilities

Provo, Inc., had revenues of $10,000,000, cash operating expenses of $5,000,000, and depreciation and amortization of $1,000,000 during 2015. The firm purchased $500,000 of equipment during the year while increasing its inventory by $300,000 (with no..

  Calculate the non-operating terminal year cash flow

Calculate the net operating cash flows in years 1, 2, and 3 and calculate the non-operating terminal year cash flow.

  What is intrinsic value

Stock X is expected to pay $2 dividend per year for ten years and then a $20 liquidating dividend in the 10th year. The appropriate discount rate is 12%. What is x's intrinsic value?

  What are the expiration date profits to position for stock

You buy a straddle, which means you purchase a put and a call with the same strike price. The put price is $1.20 and the call price is $3.50. Assume the strike price is $30. a. What are the expiration date profits to this position for stock prices of..

  After-tax cost of debt for a new issue of bonds

The coupon rate on an issue of debt is 8%. The yield to maturity on this issue is 10%. The corporate tax rate is 31%. What would be the approximate after-tax cost of debt for a new issue of bonds?

  Identify the direction of change in modified duration

Calculate modified duration using the information above. If the yield to maturity increases to 8.5%, what will be the change (in dollar amount) in bond price? Identify the direction of change in modified duration if: i. the coupon of the bond is 4%, ..

  What is the effective cost rate of the costly credit

A firm buys on terms of 2/10, net 30, but generally does not pay until 40 days after the invoice date. Its purchases totaled $1,095,000 per year. How much “non-free” trade credit does the firm use on average each year? What is the nominal cost of “no..

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