Consider the following for watson power company. Debt 5,500 6.5% coupon bonds outstanding. 1,000 par value, 22 years to maturity, selling for 104% of par, semi-annual payments Common Stock 1325,000 shares outstanding selling for $63/share. Beta is 1.19 Preferred Stock 18,000 6% preferred stock outstanding selling for $107/share. Market 8% market risk premium, 6% risk-free rate Company's tax rate is 34% What is WACC?

Consider the following for watson power company. Debt 5,500 6.5% coupon bonds outstanding. 1,000 par value, 22 years to maturity, selling for 104% of par, semi-annual payments Common Stock 1325,000 shares outstanding selling for $63/share. Beta is 1.19 Preferred Stock 18,000 6% preferred stock outstanding selling for $107/share. Market 8% market risk premium, 6% risk-free rate Company's tax rate is 34% What is WACC?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Calculate the WACC for Aya Ltd, using the following: 5,000 outstanding, 6% semi-annual coupon bonds, with 25 Debt. years to maturity and selling for 105; 175,000 shares outstanding, selling for $58.00 per share, Common Stock: with a beta of 1.10 Market: equity risk premium of 7% and 5% risk free rate. Tax Rate: 35%
You are given the following information regarding UFSK limited, a listed entity. Number of outstanding shares 100 000 Earnings 300 000 Retention ratio 60% 91-day Treasury bill rate 6% Market risk premium 8% UFSK Beta 1.2 Dividend growth rate stable phase 5% Bonds outstanding 5 000 Par value per bond 1000 Semi-annual coupon rate on bonds 6% Bond yield to maturity 8% Bond years remaining to maturity 4 Corporate tax rate 30% Additional information UFSK limited recently paid a dividend UFSK recently signed a deal and expects a super normal growth in earnings. The company expects earnings to grow by 8% for the first two years then decline by 2% in the following year, there after a stable growth of 5% is expected into the future. Required: As an investment analyst advise your client how much must she expect to pay for UFSK limited stock. Ascertain the market value of UFSK…
You are given the following information regarding UFSK limited, a listed entity. Number of outstanding shares 100 000 Earnings 300 000 Retention ratio 60% 91-day Treasury bill rate 6% Market risk premium 8% UFSK Beta 1.2 Dividend growth rate stable phase 5% Bonds outstanding 5 000 Par value per bond 1000 Semi-annual coupon rate on bonds 6% Bond yield to maturity 8% Bond years remaining to maturity 4 Corporate tax rate 30% Additional information UFSK limited recently paid a dividend UFSK recently signed a deal and expects a super normal growth in earnings. The company expects earnings to grow by 8% for the first two years then decline by 2% in the following year, there after a stable growth of 5% is expected into the future. Required: Determine the total value of UFSK limited
You are given the following information regarding UFSK limited, a listed entity. Number of outstanding shares 100 000 Earnings 300 000 Retention ratio 60% 91-day Treasury bill rate 6% Market risk premium 8% UFSK Beta 1.2 Dividend growth rate stable phase 5% Bonds outstanding 5 000 Par value per bond 1000 Semi-annual coupon rate on bonds 6% Bond yield to maturity 8% Bond years remaining to maturity 4 Corporate tax rate 30% Additional information UFSK limited recently paid a dividend UFSK recently signed a deal and expects a super normal growth in earnings. The company expects earnings to grow by 8% for the first two years then decline by 2% in the following year, there after a stable growth of 5% is expected into the future. Required: a) As an investment analyst advise your client how much must she expect to pay for UFSK limited stock. b) Ascertain the market value of UFSK limited equity. c) Determine the fair value of UFSK limited bond d) Determine the total value of the company's debt…
You are given the following information regarding UFSK limited, a listed entity. Number of outstanding shares 100 000 Earnings 300 000 Retention ratio 60% 91-day Treasury bill rate 6% Market risk premium 8% UFSK Beta 1.2 Dividend growth rate stable phase 5% Bonds outstanding 5 000 Par value per bond 1000 Semi-annual coupon rate on bonds 6% Bond yield to maturity 8% Bond years remaining to maturity 4 Corporate tax rate 30% Additional information UFSK limited recently paid a dividend UFSK recently signed a deal and expects a super normal growth in earnings. The company expects earnings to grow by 8% for the first two years then decline by 2% in the following year, there after a stable growth of 5% is expected into the future. Required: a)As an investment analyst advise your client how much must she expect to pay for UFSK limited stock. b)Ascertain the…
You are given the following information regarding UFSK limited, a listed entity. Number of outstanding shares 100 000 Earnings 300 000 Retention ratio 60% 91-day Treasury bill rate 6% Market risk premium 8% UFSK Beta 1.2 Dividend growth rate stable phase 5% Bonds outstanding 5 000 Par value per bond 1000 Semi-annual coupon rate on bonds 6% Bond yield to maturity 8% Bond years remaining to maturity 4 Corporate tax rate 30% Additional information UFSK limited recently paid a dividend UFSK recently signed a deal and expects a super normal growth in earnings. The company expects earnings to grow by 8% for the first two years then decline by 2% in the following year, there after a stable growth of 5% is expected into the future. 1. Ascertain the market value of UFSK limited equity. 2. Determine the fair value of UFSK limited bond. 3.…
You are given the following information regarding UFSK limited, a listed entity. Number of outstanding shares 100 000 Earnings 300 000 Retention ratio 60% 91-day Treasury bill rate 6% Market risk premium 8% UFSK Beta 1.2 Dividend growth rate stable phase 5% Bonds outstanding 5 000 Par value per bond 1000 Semi-annual coupon rate on bonds 6% Bond yield to maturity 8% Bond years remaining to maturity 4 Corporate tax rate 30% Additional information UFSK limited recently paid a dividend UFSK recently signed a deal and expects a super normal growth in earnings. The company expects earnings to grow by 8% for the first two years then decline by 2% in the following year, there after a stable growth of 5% is expected into the future. Required: Ascertain the market value of UFSK limited equity.
Consider the following information for Watson Power Co.: Debt: 4,500 7 percent coupon bonds outstanding, $1,000 par value, 18 years to maturity, selling for 103 percent of par; the bonds make semiannual payments. Common stock: 108,000 shares outstanding, selling for $61 per share; the beta is 1.08. Preferred stock: 14,000 shares of 6.5 percent preferred stock outstanding, currently selling for $104 per share. Market: 9 percent market risk premium and 6 percent risk-free rate. Assume the company's tax rate is 34 percent. Find the WACC.
Consider the following information for Watson Power Company: Debt: 2,500 6 percent coupon bonds outstanding, $1,000 par value, 17 years to maturity, selling for 103 percent of par; the bonds make semiannual payments. Common stock: 50,000 shares outstanding, selling for $64 per share; the beta is 1.1. Preferred stock: 7,500 shares of 5.5 percent preferred stock outstanding, currently selling for $106 per share. Market: 8 percent market risk premium and 5 percent risk-free rate. Assume the company's tax rate is 34 percent. Find the WACC. Multiple Choice 8.83% 8.93% 9.23% 9.59% 8.73%
Consider the following information for Evenflow Power Co., Debt: Common stock: 4,000 7 percent coupon bonds outstanding, $1,000 par value, 17 years to maturity, selling for 102 percent of par; the bonds make semiannual payments. 84,000 shares outstanding, selling for $59 per share; the beta is 1.17. 13,000 shares of 6.5 percent preferred stock outstanding, currently selling for $103 per share. 8.5 percent market risk premium and 6 percent risk-free rate. Preferred stock: Market: Assume the company's tax rate is 31 percent. Required: Find the WACC. (Do not round your intermediate calculations.)
You are given the following information on Parrothead Enterprises: Debt: Common stock: Preferred stock: Market: 8,600 7.2 percent coupon bonds outstanding, with 23 years to maturity and a quoted price of 107. These bonds pay interest semiannually and have a par value of $2,000. WACC 285,000 shares of common stock selling for $65.70 per share. The stock has a beta of 1.02 and will pay a dividend of $3.90 next year. The dividend is expected to grow by 5.2 percent per year indefinitely. 9,200 shares of 4.6 percent preferred stock selling at $95.20 per share. The par value is $100 per share. 10.8 percent expected return, risk-free rate of 4.2 percent, and a 22 percent tax rate. Calculate the company's WACC. Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. %
Consider the following information for Evenflow Power Co., Debt: 4,000 7.5 percent coupon bonds outstanding, $1,000 par value, 23 years to maturity, selling for 104 percent of par; the bonds make semiannual payments. Common stock: 100,000 shares outstanding, selling for $61 per share; the beta is 1.1. Preferred stock: 13,000 shares of 6.5 percent preferred stock outstanding, currently selling for $105 per share. Market: 9 percent market risk premium and 6 percent risk-free rate. Assume the company's tax rate is 32 percent. Required: Find the WACC. (Do not round your intermediate calculations.) Multiple Choice 11.21% 10.96% 11.63% 10.71% 10.81%

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