Calculate the wacc, Accounting Basics

Assignment Help:

The capital structure of Wild West Inc. is as follows:

-         Debts: $5,000,000 (face value) bonds with coupon rate at 8.00% and current price at par

-         Preferred shares: $2,000,000 (face value) paying 5% dividends which is trading at 95 percent

-         Common shares: Current stock price at $5 per share with 1,000,000 shares issued and outstanding.  The risk-free rate is 5%, the market risk premium is 6%, and the beta of Wild West Inc. is 1.15

-         Marginal tax rate is 40% 

Requirements: Show your calculation

a.       Calculate the WACC for Wild West Inc. 

b.      Should Wild West Inc. accept an IRR of 7% new project which is of similar risk as all the existing projects of the Big Plan?  Why and why not? 

c.       Should Wild West Inc. accept an IRR of 12% new project which is considered 30% higher in risk as compared with all the existing projects of the Big Plan?  Why and why not?


Related Discussions:- Calculate the wacc

Formula Needed, Hello, I work in the Events Department for a country club i...

Hello, I work in the Events Department for a country club in Rhode Island. We are trying to figure out the following question for an invoice: A restaurant bill is $18.50 and inclu

Acme inc. has total liabilities of $120, Acme Inc. has total liabilities of...

Acme Inc. has total liabilities of $120,000, total sales of $80,000, net income of $12,000, current assets of $90,000 and total assets of $150,000. What is the debt to equity rat

Annual interest of 5% paid if balance exceeds, Annual interest of 5% paid i...

Annual interest of 5% paid if balance exceeds 800, $7 monthly fee if account falls below minimum balance, average monthly balance $1,160, account falls below $800 during 5 months

Lifo under periodic inventory procedure, Q. LIFO under periodic inventory p...

Q. LIFO under periodic inventory procedure? The LIFO (last-in, firstout) method of inventory costing presume that the costs of the most recent purchases are the first costs cha

Assume tc stands for total cost, 1. Fill in the table below.  Assume TC sta...

1. Fill in the table below.  Assume TC stands for Total Cost, TFC as Total Fixed Cost, TVC as Total Variable Cost, ATC as Average Total Cost, AFC as Average Fixed Cost, AVC as Aver

Submitted assignment, I submitted an assignment this morning and have heard...

I submitted an assignment this morning and have heard nothing back

Effects of bias in terms of accounting, Q. Effects of bias in terms of acco...

Q. Effects of bias in terms of accounting? Where there is no correspondence the cause may be (a) bias or (b) lack of completeness. - Effects of bias. Accounting measuremen

Target company issues bonds with a par value, Target Company issues bonds w...

Target Company issues bonds with a par value of $900,000 on their stated issue date. The bonds mature in 10 years and pay 10% annual interest in semiannual payments. On the issue

Profit and loss account concepts, PROFIT AND LOSS ACCOUNT CONCEPTS: The...

PROFIT AND LOSS ACCOUNT CONCEPTS: The initial point in accepting the profit and loss account is to be clear about the Significance of "profit". Profit is the return for taki

How to create account for barter transactions?, How to create account for b...

How to create account for barter transactions? As My Company is providing a service to another company and that company is reimbursing us with his service.

Write Your Message!

Captcha
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