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Misc. Accounting Problems




Question;1. The target capital structure for Jowers Manufacturing is 50 percent common stock, 14 percent preferred stock, and 36 percent debt. If the cost of equity for the firm is 19.4 percent, the cost of preferred stock is 12.2 %, and the before-tax cost of debt is 9.1 percent, what is Jower?s cost of capital? The firm?s marginal tax rate is 34 percent. Jower?s WACC is % (ROUND TO THREE decimal places.)2. (Weighted average cost of capital) The target capital structure for QM Industries is 40 percent common stock, 10 percent preferred stock, and 50 percent debt.If the cost of equity for the firm is 18 percent, the cost of preferred stock is 10 percent, the before-tax cost of debt is 8 percent, and the firm?s tax rate is 35 percent, what is QM?s weighted average cost of capital?3. Crypton electronics has a capital structure consisting of 44% common stock and 56% debt, a debt issue of 1000 par value, 6.5 bonds that matures in 15 years and pays an annual interest well sell for $975. Common stock of the firm is selling for 30.15 per share and the firm expects to pay a 2.31 dividend next year. Dividends have grown at the rate of 4.7% per year and expected to continue to do so for the foreseeable future. What is Cryptons cost of capital where the firms tax rate is 30% Crypton?s cost of capital is % (Round to three decimal places.)4. 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 firms present capital structure reflects the appropriate mix of capital source for the firms, you have determined the market value of the firm?s capital structure as follows Bonds $3,600,000, preferred stock $2,200,000, common stock $ 6,400,000. To finance the purchase ranch manufacturing will sell 10 year bonds paying 7.3 % per year @ a market price of 1,045.preferred stock paying $2.09 dividend can be sold for 24.78 common stock for ranch manufacturing is currently selling for 54.14 per share and the firm paid a 2.92 dividend last year. Dividend are expected to continue growing at a rate of 5.1 per year into the indefinite future, if the firms tax rate is 30% what discount rate should you use to evaluate the equipment purchased.Ranch manufacturing company WACC is _____________ round 3 decimal places.


Paper#43873 | Written in 18-Jul-2015

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