Details of this Paper

Below is the assignment I have been trying to solv...

Description

Solution


Question

Below is the assignment I have been trying to solve for the past two days. I am losing my mind because I am not grasping how to calculate and get the answers that are needed or seem correct. Can anyone help please. Answer the following questions in an Excel document. Solve using Excel formulas (preferred) or clearly write out the steps you took to calculate your answers. Round any dollar amounts to the nearest dollar ($1,500,074) and any percentages to two decimals (9.56%). 1. Market prices are $1,035 for bonds, $19 for preferred stock, and $35 for common stock. There will be sufficient internal common equity funding (i.e., retained earnings) available such that the firm does not plan to issue new common stock. Calculate the firm?s weighted average cost of capital. 2. In part a we assumed that Nealon would have sufficient retained earnings such that it would not need to sell additional common stock to finance its new investments. Consider the situation now, when Nealon?s retained earnings anticipated for the coming year are expected to fall short of the equity requirement of 47 percent of new capital raised. Consequently, the firm foresees the possibility that new common shares will have to be issued. To facilitate the sale of shares, Nealon?s investment banker has advised management that they should expect a price discount of approximately 7 percent, or $2.45 per share. Under these terms, the new shares should provide net proceeds of about $32.55. What is Nealon?s cost of equity capital when new shares are sold, and what is the weighted average cost of the added funds involved in the issuance of new shares? The balance sheet that follows indicates the capital structure for Nealon Inc. Flotation costs are (a) 15 percent of market value for a new bond issue, and (b) $2.01 per share for preferred stock. The dividends for common stock were $2.50 last year and are projected to have an annual growth rate of 6 percent. The firm is in a 34 percent tax bracket. What is the weighted average cost of capital if the firm?s finances are in the following proportions? This is what the table lists: TYPE OF FINANCING PERCENTAGE OF FUTURE FINANING Bonds (8%,$1,000 par,16-yr maturity) 38% Preferred stock (5,000 shares outstanding, $50 par, $1.50 dividend) 15% Common equity 47% Total 100% a. Market prices are $1,035 for bonds, $19 for preferred stock, and $35 for common stock. There will be sufficient internal common equity funding (i.e., retained earnings) available such that the firm does not plan to issue new common stock. Calculate the firm?s weighted average cost of capital. b. In part a we assumed that Nealon would have sufficient retained earnings such that it would not need to sell additional common stock to finance its new investments. Consider the situation now, when Nealon?s retained earnings anticipated for the coming year are expected to fall short of the equity requirement of 47 percent of new capital raised. Consequently, the firm foresees the possibility that new common shares will have to be issued. To facilitate the sale of shares, Nealon?s investment banker has advised management that they should expect a price discount of approximately 7 percent, or $2.45 per share. Under these terms, the new shares should provide net proceeds of about $32.55. What is Nealon?s cost of equity capital when new shares are sold, and what is the weighted average cost of the added funds involved in the issuance of new shares?,Hello Rachel. Thank you for helping me last time. I received almost all the point on that assignment and was also able to answer additional questions the instructor had for me.

 

Paper#1676 | Written in 18-Jul-2015

Price : $25
SiteLock