Home / Questions / What is the market interest rate on XYZ’s debt and its component cost of debt Coupon rate ...
)What is the market interest rate on XYZ’s debt and its component cost of debt?
|
Coupon rate |
12% |
|
Coupons per year |
2 |
|
Years to maturity |
15 |
|
Price |
$1,153.72 |
|
Face value |
$1,000 |
|
Tax rate |
40% |
Market Interest Rate =
Cost of Debt =
2. (12.5 Points)What is the firm’s cost of preferred stock?
|
Nominal dividend rate |
10% |
|
Dividends per year |
4 |
|
Par value |
$100 |
|
Price |
$111.10 |
Cost of Preferred Stock =
3. (12.5 Points)What is XYZ’s estimated cost of common equity using the CAPM approach?
|
ß |
1.2 |
|
rRF |
7% |
|
RPM |
6% |
Estimated Cost of Common Equity =
4. (12.5 Points)What is the estimated cost of common equity using the DCF approach?
|
Price |
$50 |
|
Current dividend |
$4.19 |
|
Constant growth rate |
5% |
Estimated Cost of Common Equity =
5. (12.5 Points)What is the bond-yield-plus-risk-premium estimate for XYZ’s cost of common equity?
|
"Bond yield + RP" premium |
4% |
|
market interest rate on XYZ’s debt |
10% |
Bond-yield-plus-risk-premium estimate =
6. (12.5 Points)What is your final estimate for rs?
|
METHOD |
ESTIMATE |
|
CAPM |
14.20% |
|
DCF |
13.80% |
|
rd + RP |
14.00% |
Estimate =
7. (12.5 points)XYZ estimates that if it issues new common stock, the flotation cost will be 15%. XYZ incorporates the flotation costs into the DCF approach. What is the estimated cost of newly issued common stock, considering the flotation cost?
|
% Flotation cost |
15% |
|
|
Net proceeds after flotation |
$42.50 |
|
Cost of Newly Issued Common Stock
8. (12.5 Points)What is XYZ’s overall, or weighted average, cost of capital (WACC)? Ignore flotation costs.
|
wd |
30% |
rd (1 – T) |
6.00% |
|
wp |
10% |
rp |
9.00% |
|
wc |
60% |
rs |
14.00% |
May 18 2020 View more View Less
The radius of a right circular cylinder is given by and its height is where t is time in seconds and the dimensions are in inches. Find the rate of change of the volume...
Jul 11 2021LVM has registered trademarks for "LOUIS VUITTON" in connection with luggage and ladies' handbags (the "LOUIS VUITTON mark") and for a stylized monogram of "LV," used in ...
Jul 27 2021Pumping WaterA water well has an 8-inch diameter and is 190 feet deep. The water is 25 feet from the top of the well. Determine the amount of work done in pumping the well dry.
Jul 26 2021A rectangular beam of c/s 30 cm x 20 cm is prestressed by means of 15 wires of 5mm dia is at 6.5 cm from the bottom of the beam and three wires of 5 mm dia is at 2.5 cm f...
Jul 10 2020Use the table of values of to estimate the values of and
Jul 07 2021Explain using diagrams how monopoly power can impose costs on society. (b) If the gains to producers from monopoly power could be redistributed to consumers, would the so...
May 04 2020You buy a certificate of deposit (CD) that pays a nominal rate of 12% annually. You have a tax rate of 25%, so if the interest on this CD is taxable ( which it may not be...
Jun 08 2018Insect-Assisted Fertilization in MossMoss sperm can swim, but plant ecologist Nils Cronberg suspected that they sometimes hitch a ride on crawling insects or mites (tiny ...
Jun 06 2021If y = cosu ,u =1' +4t - 5, then 11 dt Select one: -(t' + 4t - 5) sin(t' + 4t – 5) NONE -(312 + 4) sin(t +46 - 5) (3t? +4) sin(t' + 4t - 5)
May 13 2021What would a decrease in interest rates caused by a change in the price level result in?
Jul 02 2021