|
|
11.03%
3.
value:
10.00 points
|
Jiminy's Cricket Farm issued a 30-year, 6 percent semi-annual bond 8 years ago. The bond currently sells for 92 percent of its face value. The book value of the debt issue is $18 million. The company's tax rate is 34 percent.
|
|
In addition, the company has a second debt issue on the market, a zero coupon bond with 8 years left to maturity; the book value of this issue is $81 million and the bonds sell for 74 percent of par.
|
|
(a)
|
What is the company's total book value of debt? (Do not round your intermediate calculations.)
|
|
(b)
|
What is the company's total market value of debt? (Do not round your intermediate calculations.)
|
|
(c)
|
What is your best estimate of the aftertax cost of debt? (Do not round your intermediate calculations.)
|
4.
value:
10.00 points
|
Waller, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 11 years to maturity that is quoted at 104 percent of face value. The issue makes semiannual payments and has an embedded cost of 8 percent annually.
|
|
|
(a) What is the company's pretax cost of debt? (Do not round your intermediate calculations.)
|
(b)
|
If the tax rate is 33 percent, what is the aftertax cost of debt? (Do not round your intermediate calculations.)
|
|
5.
value:
1.00 points
|
Filer Manufacturing has 5 million shares of common stock outstanding. The current share price is $71, and the book value per share is $6. Filer Manufacturing also has two bond issues outstanding. The first bond issue has a face value of $65 million, has a 6 percent coupon, and sells for 96 percent of par. The second issue has a face value of $45 million, has a 7 percent coupon, and sells for 105 percent of par. The first issue matures in 21 years, the second in 5 years.
|
|
The most recent dividend was $4.3 and the dividend growth rate is 5 percent. Assume that the overall cost of debt is the weighted average of that implied by the two outstanding debt issues. Both bonds make semiannual payments. The tax rate is 35 percent.
|
|
Required:
|
|
What is the company's WACC? (Do not round your intermediate calculations.)
|
rev: 09_20_2012, 12_13_2012, 12_20_2012,12_22_2012,12_28_2012
|
|
9.62%
|
|
|
6.35%
|
|
|
5.83%
|
|
|
12.18%
|
|
|
6.09%
6.
value:
10.00 points
|
Sixx AM Manufacturing has a target debt—equity ratio of 0.63. Its cost of equity is 21 percent, and its cost of debt is 10 percent. If the tax rate is 32 percent, what is the company's WACC?
|
rev: 09_20_2012
|
|
12.05%
|
|
|
16.29%
|
|
|
15.51%
|
|
|
12.29%
|
|
|
14.74%
|
7.
value:
10.00 points
|
Consider the following information for Evenflow Power Co.,
|
|
|
|
|
|
|
Debt:
|
|
3,000 7.5 percent coupon bonds outstanding, $1,000 par value, 19 years to maturity, selling for 105 percent of par; the bonds make semiannual payments.
|
|
|
Common stock:
|
|
66,000 shares outstanding, selling for $59 per share; the beta is 1.08.
|
|
|
Preferred stock:
|
|
10,000 shares of 6.5 percent preferred stock outstanding, currently selling for $106 per share.
|
|
|
Market:
|
|
9.5 percent market risk premium and 5.5 percent risk-free rate.
|
|
|
|
|
Assume the company's tax rate is 32 percent.
|
|
Find the WACC. (Do not round your intermediate calculations.)
|
rev: 09_20_2012
|
|
10.23%
|
|
|
11.1%
|
|
|
10.63%
|
|
|
10.13%
|
|
|
10.42%
8.
value:
10.00 points
|
Jungle, Inc., has a target debt—equity ratio of 0.86. Its WACC is 12 percent, and the tax rate is 32 percent.
|
|
(a)
|
If Jungle's cost of equity is 14.5 percent, what is the pretax cost of debt? (Do not round your intermediate calculations.)
|
(b)
|
If instead you know that the aftertax cost of debt is 6.5 percent, what is the cost of equity? (Do not round your intermediate calculations.)
|
|
|
|
|
acoscilio1776
wacc_finance_hw.docx
