CER Corporation has 8.75 million shares of common stock outstanding, 215,000 shares of RM6 annual dividend preferred stock outstanding, and 105,000 of 7.5% semi-annual bond outstanding. The common stock is currently sells for RM34 per share and has a beta of 1.25, the preferred stock currently sells for RM91 per share, and the bonds have 15 years to maturity and sell for 93% of par. The market risk premium is 8.5%, T-bills are yielding 5%, and corporate tax rate is 35%. Calculate the following: (d) Cost of debt. (e) Weighted Average Cost of Capital (WACC)

CER Corporation has 8.75 million shares of common stock outstanding, 215,000 shares of RM6 annual dividend preferred stock outstanding, and 105,000 of 7.5% semi-annual bond outstanding. The common stock is currently sells for RM34 per share and has a beta of 1.25, the preferred stock currently sells for RM91 per share, and the bonds have 15 years to maturity and sell for 93% of par. The market risk premium is 8.5%, T-bills are yielding 5%, and corporate tax rate is 35%. Calculate the following: (d) Cost of debt. (e) Weighted Average Cost of Capital (WACC)

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter7: Analysis Of Financial Statements

Section: Chapter Questions

Problem 3P: Winston Watch’s stock price is $75 per share. Winston has $10 billion in total assets. Its balance...

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QUESTION 3 CER Corporation has 8.75 million shares of common stock outstanding, 215,000 sharesof RM6 annual dividend preferred stock outstanding, and 105,000 of 7.5% semi-annualbond outstanding. The common stock is currently sells for RM34 per share and has abeta of 1.25, the preferred stock currently sells for RM91 per share, and the bonds have15 years to maturity and sell for 93% of par. The market risk premium is 8.5%, T-bills areyielding 5%, and corporate tax rate is 35%. Calculate the following:(a) Firm’s market value capital structure.(b) Cost of equity.(c) Cost of preferred stock Thank you
NO2.4 The Smith Company has 10,000 bonds outstanding. The bonds are selling at 102% of face value, have a 8% coupon rate, pay interest annually, mature in 10 years, and have a face value of $1,000. There are 500,000 shares of 9% preferred stock outstanding with a current market price of $91 a share and a par value of $100. In addition, there are 1.25 million shares of common stock outstanding with a market price of $64 a share and a beta of .95. The most recent dividend paid by the company on the common stock was of $1.10 and it expects to increase those dividends by 3% annually forever. The firm's marginal tax rate is 35%. The overall stock market is yielding 12% and the Treasury bill rate is 3.5%.
Question 4 The following information is available for the capital structure of TestraQ Group: Debt: $3,500,000 par value of outstanding corporate bonds that pay a semi-annual 11.5% coupon rate with an annual before-tax yield to maturity of 10%. The bond issue has a face value of $1,000 and will mature in 30 years. Ordinary shares: 75,000 outstanding ordinary shares which just paid a $4.50 dividend per share in the current financial year. The firm is maintaining 9% annual growth rate in dividends, which is expected to continue indefinitely. Prefered share: 42 000 preference shares with a 13% fixed dividend rate, face value of $100, market price of $123. Required: Complete the following tasks: Calculate the current price of the corporate bond for the TestraQ Group? Calculate the current market value of the ordinary share of the TestraQ Group if the average return…
question 2 a) Fr berhad has 6.5 million shares of common stock outsdanding with a market price of RM14 per share. This company has a market value of RM10 million outstanding preferred stock. their corporate bonds outstanding is 25,000 with face value of RM1000 and selling at 90% of face value on the bond market.The cost of equity is 14%, the cost preferred is 10% and the pre- tax cost of debt is 7.5%. Their marginal corporate tax rate is 30%. i) Calculate the market value for common stoc preferred stock, corporate bond and firm. ii)calculate the firm's Weightage average cost of capital (WACC).
1) Bombay Inc has 8.5 million shares of common stock outstanding, 250,000shares of 5% preferred stock outstanding, and 135,000 7.5% semi-annualbonds outstanding, par value $1000 EACH. The common stock currently sellsfor $34 per share and has a beta of 1.25, the preferred stock currently sells for$91 per share, and the bonds have 15 years to maturity and sell for 114% ofpar. The market risk premium is 7.5%, T-bills are yielding 4%, and thecompany’s tax rate is 35%.a) Calculate the firm’s market value capital structure.b) Calculate the company WACCc) If Bombay Inc generates a 7.5% with this capital, is Bombay Incdestroying or adding value discuss.
A firm has 1 million shares outstanding with a book value per share of $10 per share. The stock sells for a price of $20 per share. The firm’s bonds have a par value of $8 million and are currently selling at a price of 120 percent of par. What is the appropriate proportion of equity to use in the WACC calculation? 71.4 percent 51.0 percent 55.6 percent 48.0 percent 67.6 percent
Assume XYZ company has 25million shares of common stock outstanding, 90,000 shares of 12 percent preferred stock outstanding and 200,000 ten percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $25 per share and has a beta of 1.8, the preferred stock currently sells for $80 per share, and the bonds have 20 years to maturity and sell for 105 percent of par. The market risk premium is 14 percent, T-bills are yielding 9 percent, and the firm's tax rate is 35 percent.
12. Finding the WACC Titan Mining Corporation has 6.4 million shares of common stock outstanding and 175,000 6.2 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $53 per share and has a beta of 1.15; the bonds have 25 years to maturity and sell for 106 percent of par. The market risk premium is 6.8 percent, T-bills are yielding 3.1 percent, and the company's tax rate is 22 percent. a. What is the firm's market value capital structure? b. If the company is evaluating a new investment project that has the same risk as the firm's typical project, what rate should the firm use to discount the project's cash flows?
Question 8 One company has the following debt and equity: Common stock: 500,000 shares outstanding, selling for $30 per share; beta is 2.5. Debt: 10,000 bonds, selling for 105 percent of par. The bonds have a $1,000 par value each and the YTM is 8%. Preferred stock: 15,000 shares outstanding, selling for $250 per share. Annual dividend is $30 per share. The market risk premium is 4%, and the risk-free rate is 1.5%. tax rate is 21%. a) What are cost of equity, cost of debt, and cost of preferred stock? b) What is the capital structure weights of the company? (hint: the weight of each financing) c) What is the cost of capital of the company?
2. Cobra Banking Group issued preferred shares 10 years ago with a stated value of $95, and a dividend yield of 7%. What is the current price of each preferred share if the required return today is 15%? Select one: a. $5.95 b. $44.33 C. $74.38 d. $79.58 e. $85.00
JS Corporation has 9 million shares of common stock outstanding, 250,000 shares of RM6 annual dividend preferred stock outstanding, and 105,000 of 7.5% semi-annual bond outstanding. The common stock is currently sells for RM34 per share and has a beta of 1.25, the preferred stock currently sells for RM91 per share, and the bonds have 15 years to maturity and sell for 93% of par. The market risk premium is 8.5%, T-bills are yielding 5%, and corporate tax rate is 35%. Calculate the cost of debt and Weighted Average Cost of Capital (WACC).
What is the capital structure of this company based on market values? Bond issue #1, maturity 12 years, coupon rate 9%, current YTM 9.75%, book value $10 million Bond issue #2, maturity 16 years, coupon rate 9%, current YTM 7.75%, book value $15 million Preferred stock, 500,000 shares, par $10 per share Common stock, par $1 per share, book value $10 million Market price of preferred stock is $17.50, market price of common stock is $15 What is the WACC if: Tax rate = 40% Preferred stock dividend = $1.50 per share Common stock dividend = $.375 per share Beta is 1.15 RFR = 5.21% Expected return of the market = 14%