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ReviewFinal - ReviewforFinalExam ReviewforFinalExam 299...

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Review for Final Exam FINC 3610 Yost Review for Final Exam 299 Final Exam __________________________ ___________________ ______________ 300 Don’t Forget: Scan Sheet Calculator Pencil Picture ID Cheat Sheet Things To Do… Study both the notes and the book. Do suggested problems. 301 Do more problems! Be comfortable with calculator, but understand concepts (e.g., timeline). Get help if you are having problems.
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Review for Final Exam FINC 3610 Yost Tips Be Prepared Read Questions Carefully What information is given? What is being asked? Ask if something is not clear. See the big picture! 302 Example #1 A firm has 1 million shares of common stock outstanding, each currently trading at $40. The firm’s stock has a beta of 1.3. The firm also has 10 000 bonds outstanding each with a $1 000 10,000 bonds outstanding, each with a $1,000 par value and an 8 percent annual coupon. The bonds mature in 22 years and currently sell for $1,101.23. You also know that the market risk premium is 8.6%, the return on U.S. Treasury bills is 4.5 percent, and the firm has a marginal tax rate of 34%. What is the firm’s WACC? 303 Example #2 Assume the same information as Example #1, but now you know the firm has a target debt/equity ratio of 0.2753. What is the firm’s WACC?
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