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FIN 370 questions (4 questions solved in excel)
1. (Weighted Average Cost of Capital) The target capital structure for QM Industries is 35% common stock, 15% preferred stock, and 50% debt. If the cost of common equity for the firm is 17.3%, the cost of preferred stock is 9.3%, the before –tax cost of debt is 8.8%, and the firm’s tax rate is 35%, what is QM’s weighted average cost of capital?
QM’s WACC is ___% (Round to three decimal places).
2. (Weighted Average Cost of Capital) Crypton Electronics has a capital structure consisting of 38% common stock and 62% debt. A debt issue of $1000 par value, 6.3% bonds that mature in 15 years and pay annual interest will sell for $976. Common stock of the firm is currently selling for $29.39 per share and the firm expects to pay a $2.35 dividend next year. Dividends have grown at the rate of 5.1% per year and are expected to continue to do so for the foreseeable future. What is Crypton’s cost of capital where the firm’s tax rate is 30%?
Crypton’s cost of capital is ___%. (Round to three decimal places).
3. (Weighted Average Cost of Capital) The target capital structure for Jowers Manufacturing is 48% common stock, 18% preferred stock, and 34% debt. If the cost of common equity for the firm is 19.2%, the cost of preferred stock is 12.1%, and the beforetax cost of debt is 9.3%, what is Jowers’ cost of capital? The firm’s tax rate is 34%.
Jowers’ WACC is ____% (Round to three decimal places).
4. (Weighted Average Cost of Capital) As a member of the Finance Department of Ranch Manufacturing, your supervisor has asked you to compute the appropriate discount rate to use when evaluating the purchase of new packaging equipment for the plant. Under the assumption that the firm’s present capital structure reflects the appropriate mix of capital sources for the firm, you have determined the market value of the firm’s capital structure as follows.
To finance the purchase, Ranch Manufacturing will sell 10-year bonds paying 7.3% per year at the market price of $1,027. Preferred stock paying a $1.99 dividend can be sold for $24.66. Common stock for Ranch Manufacturing is currently selling for $54.87 per share and the firm paid a $2.98 dividend last year. Dividends are expected to continue growing at a rate of 4.7% per year into the indefinite future. If the firm’s tax rate is 30%, what discount rate should you use to evaluate the equipment purchase?
Ranch Manufacturing’s WACC is ____%. (Round to three decimal places.)
Data Table
Source of Capital Market Values
Bonds $3,600,000
Preferred stock $1,700,000
Common stock $5,600,000
Questions are solved in excel
Answer will be sent by email. It may take few hours to send the asnwer. You may email us if you have any query.
QM’s WACC is ___% (Round to three decimal places).
2. (Weighted Average Cost of Capital) Crypton Electronics has a capital structure consisting of 38% common stock and 62% debt. A debt issue of $1000 par value, 6.3% bonds that mature in 15 years and pay annual interest will sell for $976. Common stock of the firm is currently selling for $29.39 per share and the firm expects to pay a $2.35 dividend next year. Dividends have grown at the rate of 5.1% per year and are expected to continue to do so for the foreseeable future. What is Crypton’s cost of capital where the firm’s tax rate is 30%?
Crypton’s cost of capital is ___%. (Round to three decimal places).
3. (Weighted Average Cost of Capital) The target capital structure for Jowers Manufacturing is 48% common stock, 18% preferred stock, and 34% debt. If the cost of common equity for the firm is 19.2%, the cost of preferred stock is 12.1%, and the beforetax cost of debt is 9.3%, what is Jowers’ cost of capital? The firm’s tax rate is 34%.
Jowers’ WACC is ____% (Round to three decimal places).
4. (Weighted Average Cost of Capital) As a member of the Finance Department of Ranch Manufacturing, your supervisor has asked you to compute the appropriate discount rate to use when evaluating the purchase of new packaging equipment for the plant. Under the assumption that the firm’s present capital structure reflects the appropriate mix of capital sources for the firm, you have determined the market value of the firm’s capital structure as follows.
To finance the purchase, Ranch Manufacturing will sell 10-year bonds paying 7.3% per year at the market price of $1,027. Preferred stock paying a $1.99 dividend can be sold for $24.66. Common stock for Ranch Manufacturing is currently selling for $54.87 per share and the firm paid a $2.98 dividend last year. Dividends are expected to continue growing at a rate of 4.7% per year into the indefinite future. If the firm’s tax rate is 30%, what discount rate should you use to evaluate the equipment purchase?
Ranch Manufacturing’s WACC is ____%. (Round to three decimal places.)
Data Table
Source of Capital Market Values
Bonds $3,600,000
Preferred stock $1,700,000
Common stock $5,600,000
Questions are solved in excel
Answer will be sent by email. It may take few hours to send the asnwer. You may email us if you have any query.
