The weighted average cost of capital (WACC) is the discount rate used in the discounted cash flow analysis. Usually, the WACC is the weighted average of the cost of debt (Kd) and the cost of equity (Ke), since debt and equity are the most common sources of funds for the companies. In general, the formula for WACC is the following:…
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.…
The comptroller currently finds the weights for the weighted average cost of capital (WACC) from information from the balance sheet shown in Table 2. Compute the book value weights that the comptroller currently uses for the company’s capital structure.…
4. Calculate all financial ratios. Use “A Basic Set of Financial Ratios” from Desire2Learn as a guide.…
Should you use book or market value weights? If you want market value of debt use (BV/100) * Price…
Wrigley’s pre recapitalization WACC is 10.9%, the cost of equity assumes a risk free rate of 5.65% for 20 years US treasuries in the case exhibit 7; a risk premium is assumed 7% (or 5%), and uses Wrigley’s current beta of 0.75 (case Exhibit 5).…
2. Compute HydroTech’s equity and (net) debt weights based on the market value of equity and the book value of net debt.…
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?…
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%…
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.…
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.…
WACC = (% of debt) (After-tax cost of debt) + (% of preferred stock) (cost of preferred stock) + (% of common stock) (cost of common…