The market value of Glenwood's debt and equity capital totals $180 million, 80% of which is equity related. An analysis conducted by the company's finance department revealed a 7% after-tax cost of debt capital and a 10% cost of equity capital. On the basis of this information, Glenwood's weighted-average cost of capital: Select one: a. is 7.6%. b. is 8.5%. c. is 9.4%. d. cannot be determined based on the data presented because the cost of debt capital must be stated on a before-tax basis. e. cannot be determined based on the data presented because the cost of equity capital must be stated on an after-tax basis.
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- Medallion Cooling Systems, has total assets of $10,900,000, EBIT of $1,990,000, and preferred dividends of $205,000and is taxed at a rate of 40%.In an effort to determine the optimal capital structure, the firm has assembled data on the cost of debt, the number of shares of common stock for various levels of indebtedness, and the overall required return on investment: Capital structure debt ratio Cost of debt, rd Number of common stock shares Required return, rs 0% 0% 198,000 12.1% 15 7.9 171,000 13.2 30 8.9 141,000 13.8 45 12.1 107,000 16.1 60 14.9 76,000 20.1 a. Calculate earnings per share for each level of indebtedness. Debt Ratio 0% EBIT $ 1,990,000 Less: Interest $ EBT $ Taxes @40% $ Net profit $ Less: Preferreddividends $ Profits available to common stockholders $…Company X has debt and equity as sources of funds. Company X has market value of debtas $150,000 and book value of debt as $80,000. The company has book value of equity as$100,000 and market value of equity as $125,000. The cost of debt is 8.25% and cost ofequity is 9.57%. the tax rate is 38%. What is the Weighted Average Cost of Capital(WACC)?a. 7.59%b. 7.78%c. 7.14%d. 7.68%Company A has a debt to equity ratio to one. Its cost of equity is 20% and its cost of debt is 10%. Assuming a tax rate of 50%. Company A's weighted average cost of capital is? (write the process of calculation.)
- Bulldogs Inc., which is funded by debt and ordinary equity, has a debt to equity ratio of 100%. The weighted average cost of capital of the firm is 20%. Using the capital asset pricing model, the cost of equity is determined to be 30%. If the before-tax cost of debt is 16%, what is the applicable tax rate of Bulldogs Inc.? a. 37.50% b. 35.70% c. 25.55% d. 25.80%Dillon Labs has asked its financial manager to measure the cost of each specific type of capital as well as the weighted average cost of capital. The weighted average cost is to be measured by using the following weights: 35% long-term debt, 20% preferred stock, and 45% common stock equity (retained earnings, new common stock, or both). The firm's tax rate is 21%. Debt The firm can sell for $1030 a 13-year, $1,000-par-value bond paying annual interest at a 7.00% coupon rate. A flotation cost of 2% of the par value is required. Preferred stock 8.5% (annual dividend) preferred stock having a par value of $100 can be sold for $90. An additional fee of $4 per share must be paid to the underwriters. Common stock The firm's common stock is currently selling for $60 per share. The stock has paid a dividend that has gradually increased for many years, rising from $2.75 ten years ago to the $5.41 dividend payment, D0, that the company just recently made. If the…Dillon Labs has asked its financial manager to measure the cost of each specific type of capital as well as the weighted average cost of capital. The weighted average cost is to be measured by using the following weights: 35% long-term debt, 20% preferred stock, and 45% common stock equity (retained earnings, new common stock, or both). The firm's tax rate is 21%. Debt The firm can sell for $1030 a 13-year, $1,000-par-value bond paying annual interest at a 7.00% coupon rate. A flotation cost of 2% of the par value is required. Preferred stock 8.5% (annual dividend) preferred stock having a par value of $100 can be sold for $90. An additional fee of $4 per share must be paid to the underwriters. Common stock The firm's common stock is currently selling for $60 per share. The stock has paid a dividend that has gradually increased for many years, rising from $2.75 ten years ago to the $5.41 dividend payment, D0, that the company just recently made. If the…
- General Talc Mines has compiled the following data regarding the market value and cost of the specific sources of capital. Source of Capital Before-Tax Cost Long-term debt 8% Common stock equity 19 Market price per share of common stock $50 (7,200 shares outstanding) Market value of long-term debt is $980 per bond (150 bonds issued at $1,000 par) Tax rate is 20%. What is the weighted average cost of capital using market value weights?Company X has debt and equity as sources of funds. Company X has market value of debt as $150,000 and book value of debt as $80,000. The company has book value of equity as $100,000 and market value of equity as $125,000. The cost of debt is 8.25% and cost of equity is 9.57%. the tax rate is 38%. What is the Weighted Average Cost of Capital (WACC)? a. 7.59% b. 7.78% c. 7.14% d. 7.68%Dillon Labs has asked its financial manager to measure the cost of each specific type of capital as well as the weighted average cost of capital. The weighted average cost is to be measured by using the following weights: 40% long-term debt, 15% preferred stock, and 45% common stock equity (retained earnings, new common stock, or both). The firm's tax rate is 26%. Debt The firm can sell for $1005 a 13-year, $1,000-par-value bond paying annual interest at a 6.00% coupon rate. A flotation cost of 2.5% of the par value is required. Preferred stock 7.00% (annual dividend) preferred stock having a par value of $100 can be sold for $98. An additional fee of $5 per share must be paid to the underwriters. Common stock The firm's common stock is currently selling for $80 per share. The stock has paid a dividend that has gradually increased for many years, rising from $2.50 ten years ago to the $4.92 dividend payment, D0, that the company just recently made. If…
- Dillon Labs has asked its financial manager to measure the cost of each specific type of capital as well as the weighted average cost of capital. The weighted average cost is to be measured by using the following weights: 40% long-term debt, 15% preferred stock, and 45% common stock equity (retained earnings, new common stock, or both). The firm's tax rate is 26%. Debt The firm can sell for $1005 a 13-year, $1,000-par-value bond paying annual interest at a 6.00% coupon rate. A flotation cost of 2.5% of the par value is required. Preferred stock 7.00% (annual dividend) preferred stock having a par value of $100 can be sold for $98. An additional fee of $5 per share must be paid to the underwriters. Common stock The firm's common stock is currently selling for $80 per share. The stock has paid a dividend that has gradually increased for many years, rising from $2.50 ten years ago to the $4.92 dividend payment, D0, that the company just recently made. If…Dillon Labs has asked its financial manager to measure the cost of each specific type of capital as well as the weighted average cost of capital. The weighted average cost is to be measured by using the following weights: 30% long-term debt, 10% preferred stock, and 60% common stock equity (retained earnings, new common�� stock, or both). The firm's tax rate is 23%. Debt : The firm can sell for $1030 a 14-year, $1,000-par-value bond paying annual interest at a 8.00% coupon rate. A flotation cost of 2% of the par value is required. Preferred stock: 9.00% (annual dividend) preferred stock having a par value of $100 can be sold for $92.An additional fee of $2 per share must be paid to the underwriters. Common stock: The firm's common stock is currently selling for $90 per share. The stock has paid a dividend that has gradually increased for many years, rising from $2.00 ten years ago to the $3.26 dividend payment, D0, that the company just recently made.…Fama's Llamas has a weighted average cost of capital of 9.7 percent. The company's cost of equity is 12 percent, and its pretax cost of debt is 7.4 percent. The tax rate is 25 percent. What is the company's target debt-equity ratio?