14. Projected free cash flows should be discounted at the firm’s weighted average cost of capital to find the firm’s total corporate value.…
In this case, the corporate cost of capital needs to be analyzed and hence, to estimate that, a company’s long-term source of funds (common stock, long-term debts and preferred stock) should be used. Since the corporate cost of capital is used to make decisions today, which will affect the future cash flows, the only acceptable costs are today’s marginal costs that are used. These marginal values are the estimates of the cost of capital that will be raised in future which will provide an accurate estimation of raising the capital in future.…
What is the firm’s weighted-average cost of capital at various combinations of debt and equity; given the following information? Show work…
Are book value or market value weights better for calculating the firm’s weighted average cost of capital?…
Instructor: Daniel McConaughy Office: JH4103 Office Hours: Tuesday, Wednesday 6:00-6:30 PM and by appointment Email: daniel.mcconaughy@csun.edu Website: http://www.csun.edu/fin/mcconaughy.html Required textbook: Essentials of Corporate Finance, 6th edition Required Calculator: Hewlett Packard HP10B / HP10BII Grading: 3 Midterms Final…
Turning to the yields by credit rating given in case Exhibit 7, one can interpolate between BB (12.73%) and B (14.66%) to obtain a cost of debt. The cost used in the remainder of this analysis is 13%, Blanka Dobrynin’s choice.…
e TCH321 – CORPORATE FINANCE MOCK EXAM Time: 1 hour 30 minutes The exam lasts 1 hour and 30 minutes and consists of 5 questions. Approved calculators are permitted. You are not allowed to use Excel. This is a closed book exam. You are NOT permitted to access any other material in either written or electronic form. All numerical answers should be reported to TWO decimal places. To ensure the accuracy of your answer, you should perform all intermediate calculations to at least THREE decimal places. Choose FIVE questions. DO show your working. Question 1. (20 marks) Suppose that you have the following information about a company Credit rating Beta Tax expense Pre-tax income Preferred dividend rate Preferred stock par value Preferred stock price Preferred stock outstanding Common stock price Common stock par value Common stock outstanding Expected next common stock dividend Long term bond yield-to-maturity Enterprise value Market risk premium 30 year Treasury bond yield-to-maturity AA 0.95 14,325,000 113,895,000 5.25% $100.00 $101.25 13,000,000 $53.29 $25.00 50,000,000 $1.95 7.55% 4,945,795,000 6.00% 4.75%…
1.Assume Hutchison Whampoa will require US$1 billion of financing in 1996. Assumethat equity can be raised at $48.80 a share and that a long-term debt issue will carry aninterest rate of HIBOR plus 70 basis points. How would an equity or debt issue impactHutchison’s financial position and performance?…
b.Suppose the firm will incur direct bankruptcy costs of £1,000 in bankruptcy. Identify the value of debt and of equity under both unhedged and hedged scenarios.…
Weight of Equity = Market value of equity / (Total firm Value = (Equity + Net Debt))…
WACC = (% of debt) (After-tax cost of debt) + (% of preferred stock) (cost of preferred stock) + (% of common stock) (cost of common…
WACC = (Cost of Equity) (E / E+D) + (Cost of Debt) (1 - Tax Rate) (D / E+D)…
Being debt structure absent in Nalco the cost of debt is zero, Therefore WACC ( Weighted Average Cost of Capital)…
9. Opening stock Rs.58,000; Excess of the closing stock over opening stock.Rs.4000,sales Rs.6,40,000 Gross profit @25% on sales. Calculate stock turn over…
b. Estimate the levered value of the firm using the adjusted present value approach at a debt ratio of 50%. At that ratio the firms bond ratings will be CCC and the probability of default will increase to 36.78% of unlevered firm. The cost of bankruptcy will remain the same.…