Finance Questions

Cost of Preferred Stock with Flotation Costs
Burnwood Tech plans to issue some $60 par preferred stock with a 6% dividend. A similar stock is selling on the market for $73. Burnwood must pay flotation costs of 7% of the issue price. What is the cost of the preferred stock? Round your answer to two decimal places.
WACC
David Ortiz Motors has a target capital structure of 45% debt and 55% equity. The yield to maturity on the company’s outstanding bonds is 11%, and the company’s tax rate is 40%. Ortiz’s CFO has calculated the company’s WACC as 9.53%. What is the company’s cost of equity capital? Round your answer to two decimal places.
Bond Yield and After-Tax Cost of Debt
A company’s 8% coupon rate, semiannual payment, $1,000 par value bond that matures in 20 years sells at a price of $678.22. The company’s federal-plus-state tax rate is 30%. What is the firm’s after-tax component cost of debt for purposes of calculating the WACC? (Hint: Base your answer on the nominal rate.) Round your answer to two decimal places.
Cost of Equity
Radon Homes’s current EPS is $6.43. It was $3.60 5 years ago. The company pays out 40% of its earnings as dividends, and the stock sells for $34.
1. Calculate the historical growth rate in earnings. (Hint: This is a 5-year growth period.) Round your answer to two decimal places.
%
2. Calculate the next expected dividend per share, D1 (Hint: D0 = 0.40($6.43) = $2.57). Assume that the past growth rate will continue. Round your answer to the nearest cent.
$
3. What is Radon’s cost of equity, rs? Round your answer to two decimal places.
%
Calculation of g and EPS
Spencer Supplies’s stock is currently selling for $60 a share. The firm is expected to earn $5.70 per share this year and to pay a year-end dividend of $2.90.
1. If investors require a 9.5% return, what rate of growth must be expected for Spencer? Round your answer to two decimal places.
%
2. If Spencer reinvests earnings in projects with average returns equal to the stock’s expected rate of return, then what will be next year’s EPS? (Hint: g = ROE × Retention ratio.) Round your answer to the nearest cent.
$

The Cost of Equity and Flotation Costs
Messman Manufacturing will issue common stock to the public for $25. The expected dividend and growth in dividends are $2.75 per share and 6%, respectively. If the flotation cost is 8% of the issue’s gross proceeds, what is the cost of external equity, re? Round your answer to two decimal places.
The Cost of Equity and Flotation Costs
Suppose a company will issue new 25-year debt with a par value of $1,000 and a coupon rate of 8%, paid annually. The tax rate is 40%. If the flotation cost is 3% of the issue proceeds, then what is the after-tax cost of debt? Disregard the tax shield from the amortization of flotation costs. Round your answer to two decimal places.
WACC Estimation
On January 1, the total market value of the Tysseland Company was $60 million. During the year, the company plans to raise and invest $25 million in new projects. The firm’s present market value capital structure, shown below, is considered to be optimal. Assume that there is no short-term debt.
Debt $30,000,000
Common equity 30,000,000
Total capital $60,000,000
New bonds will have an 6% coupon rate, and they will be sold at par. Common stock is currently selling at $30 a share. The stockholders’ required rate of return is estimated to be 12%, consisting of a dividend yield of 4% and an expected constant growth rate of 8%. (The next expected dividend is $1.20, so $1.20/$30 = 4%.) The marginal corporate tax rate is 35%.
1. In order to maintain the present capital structure, how much of the new investment must be financed by common equity? Enter your answer in dollars. For example, $1.2 million should be entered as $1200000.
$
2. Assuming there is sufficient cash flow such that Tysseland can maintain its target capital structure without issuing additional shares of equity, what is its WACC? Round your answer to two decimal places.
Market Value Capital Structure
Suppose the Schoof Company has this book value balance sheet:
Current assets $30,000,000 Current liabilities $10,000,000
Fixed assets 50,000,000 Long-term debt 30,000,000
Common stock
(1 million shares) 1,000,000
Retained earnings 39,000,000
Total assets $80,000,000 Total claims $80,000,000
The current liabilities consist entirely of notes payable to banks, and the interest rate on this debt is 9%, the same as the rate on new bank loans. These bank loans are not used for seasonal financing but instead are part of the company’s permanent capital structure. The long-term debt consists of 30,000 bonds, each with a par value of $1,000, an annual coupon interest rate of 8%, and a 15-year maturity. The going rate of interest on new long-term debt, rd, is 10%, and this is the present yield to maturity on the bonds. The common stock sells at a price of $68 per share. Calculate the firm’s market value capital structure. Round your answers to two decimal places.
Short-term debt $
%

Don't use plagiarized sources. Get Your Custom Essay on
Finance Questions
Just from $5/Page
Order Essay

Long-term debt $
%

Common equity $
%

Total capital $

Order a unique copy of this paper
(550 words)

Approximate price: $22

Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

We are committed to making our customer experience enjoyable and that we are keen on creating conditions where our customers feel secured and respected in their interactions with us.
With our qualified expert team who are available 24/7, we ensure that all our customer needs and concerns are met..

Money Payback-back guarantee

Our refund policy allows you to get your money back when you are eligible for a refund. In such a case, we guarantee that you will be paid back to your credit card. Another alternative we offer you is saving this money with us as a credit. Instead of processing the money back, keeping it with us would be an easier way to pay for next the orders you place

Read more

Zero-plagiarism guarantee

All orders you place on our website are written from scratch. Our expert team ensures that they exercise professionalism, the laid down guidelines and ethical considerations which only allows crediting or acknowledging any information borrowed from scholarly sources by citing. In cases where plagiarism is confirmed, then the costumier to a full refund or a free paper revision depending on the customer’s request..

Read more

Free-revision policy

Quality is all our company is about and we make sure we hire the most qualified writers with outstanding academic qualifications in every field. To receive free revision the Company requires that the Customer provide the request within fourteen (14) days from the first completion date and within a period of thirty (30) days for dissertations.

Read more

Privacy policy

We understand that students are not allowed to seek help on their projects, papers and assignments from online writing services. We therefore strive to uphold the confidentiality that every student is entitled to. We will not share your personal information elsewhere. You are further guaranteed the full rights of originality and ownership for your paper once its finished.

Read more

Fair-cooperation guarantee

By placing an order with us, you agree to the service we provide. We will endear to do all that it takes to deliver a comprehensive paper as per your requirements. We also count on your cooperation to ensure that we deliver on this mandate.

Read more

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
$26
The price is based on these factors:
Academic level
Number of pages
Urgency