FIN 691 Practice WACC Valuation Problem Set Answer Key 2.2.xlsx

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CALCULATING WEIGHTED AVERAGE COST OF CAPITALTax rate35.00%Cost of debt12.00%After tax cost of debt7.80%WeightRequired returnDebt30.00%7.80%Preferred stock15.00%14.00%Common equity55.00%20.00%WACC15.44%The capital structure of Emrem Co. is is comprised of 15% prferred stock, 30% debt, and 55%common stock. The required return for the preferred stock and common stock are 14% and20% repectively. The company has a tax rate of 35% and a cost of debt of 12%. Use thisinformation to calculate the WACC for Emrem Co.
FINDING THE MARKET VALUE OF DEBTMarket value of equity (in millions)\$200.00Bond IssueMarket Value Today (in millions)Face Value (in millions)1\$50.00 \$125.002\$75.00 \$80.003\$125.00 \$150.00Total market value of debt\$250.00Firm value\$450.00Weight of debt55.56%Emrem Co. has a market value of equity of \$200 million. It also has three outstanding bond issues with mar\$50, 75, and \$125, with respective face values (in millions) of \$125, \$80, and \$150. Calculate the total markfirm value, and the weight of debt.
rket values (in millions) ofket value of the debt, the
CALCULATING THE WEIGHT OF EQUITYFinancial Information:Value:Shareholder equity (in millions)\$240.00# of shares outstanding (in millions)65.5Price per share\$18.25Book value of debt (in millions)\$50.00Market value of debt (% of face value)90%Market value of equity\$1,195.38Market value of debt\$45.00Firm value\$1,240.38Weight in equity96.37%Emrem Co. has the following financial information (in millions) shareholder equity of \$240, book value of d

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