We the proportion of the financing provided by equity

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We= The proportion of the financing provided by equity= 47.62% Kp= 18.75% Kd=7% Ke = 11.20% T=30% And WACC (Ka) = Wd*(Kd)*(1-t)+(Wp)*(Kp) +(We)*(Ke) ie wacc = 40.95%*7%*(1-30%) + 11.43%*18.75% + 47.62%*11.20% [email protected] S ecurity Mkt v alue Weights Bond \$8.60 40.95% Pref stoock \$2.40 11.43% C om on sock \$10.00 47.62% T ota l \$ 2 1 .0 0 1 0 0 .0 0 %
ie WACC = 9.48%
Problem 13-19 Cost of Capital (LO3) The total market value of Okefenokee Real Estate Company's equity is \$6 million, and the total value of its debt is \$4 million. The treasurer estimates that the beta of the stock currently is 0.5 and that the expected risk premium on the market is 12%. The Treasury bill rate is 4%. What is the required rate of return on Okefenokee stock? Required rate of
return What is the beta of the company’s existing portfolio of assets? The debt is perceived to be virtually risk-free. (Round your answer to 2 decimal places.)
Estimate the weighted-average cost of capital assuming a tax rate of 40%. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Estimate the discount rate for an expansion of the company’s present business. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Suppose the company wants to diversify into the manufacture of rose-colored glasses. The beta of optical manufacturers with no debt outstanding is 0.5. What is the required rate of return on Okefenokee’s new venture? (You should assume that the risky project will not enable the firm to issue any additional debt.)
Problem 13-11 Calculating WACC (LO3) The total book value of the firm’s equity is \$16 million; book value per share is \$32. The stock sells for a price of \$35 per share, and the cost of equity is 13%. The firm’s bonds have a face value of \$4 million and sell at a price of 140% of face value. The yield to maturity on the bonds is 7%, and the firm’s tax rate is 40%. Find the WACC of William Tell Computers. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Ie WACC = (5.6/23.1)*7%*(1-40%) + (17.5/23.1)*13% = 10.87%
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