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Finance!!!!!!!!!!!!!!!!!!!!!! assignment

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Question;Weighted average cost of capital) The target capital structure for QM;Industries is 45% common stock, 7% preferred stock, and 48% debt. If;the cost of common equity for the firm is 17.8%, the cost of preferred;stock is 9.8%, the before-tax cost of debt is 8.4%, 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 35% common stock and 65% debt. A debt issue of;$1,000 par value, 6.5% bonds that mature in 15 years and pay annual;interest will sell for $972. Common stock of the firm is currently;selling for $30.96 per share and the firm expects to pay a $2.16;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 46% common stock, 13% preferred stock, and 41%;debt. If the cost of common equity for the firm is 20.4%, the cost of;preferred stock is 11.4%, and the beforetax cost of debt is 9.9%, 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 fianc? the purchase;Ranch Manufacutring will sell 10-year bonds paying 7.1% per year at the;market price of $1,027. Preferred stock paying a $2.09 dividend can be;sold for $25.66. Common stock for Ranch Manufacturing is currently;selling for 455.21 per share and the firm paid a $3.04 dividend last;year. Dividends are expected to continue growing at a rate of 4.8% 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 TABLESource of capital Market valuesBonds $3,700,000Preferred stock $1,800,000Common Stock $5,900,0005.;(EBIT-EPS analysis) Abe Forrester and three of his friends from;college have interested a group of ventre capitalists in backing their;business idea. The proposed operation would consist of a ceries of;retail otlets to distribute and service a full line of vacuum cleaners;and accessories. These stores would be locted in Dallas, Houston, and;San Antonio. To fiace the new ventre two plans have been proposed:-Plan;A is an all-common-equity structure in which $2.1 million dollars would;be raised by selling 82,000 shares of common stock.-Plan B would;involve issuing $1.4 million dollars in long-term bonds with an;effective interest rate of 11.8% plus $0.7 million would be raised by;selling 41,000 shares of common stock. The debt funds raised under Plan;B have no fixed maturity date, in that this amount of financial;leverage is considered a permanent part of the firm?s capital structure.;Abe and his partners plan to use a 38% tax rate in their analysis, and;they have hired you on a consulting basis to do the following:a. Find the EBIT indifference level associated with the two financing plans.b.;Prepare a pro forma income statement for the EBIT level solved for in;Part a. that shows that EPS will be the same regarless whether Plan A or;B is chosen.a. Find the EBIT indifference level associated with the two financing plans.The EBIT indifference level associated with the two financing plans is $__________. (round to the nearest dollar).b.;Prepare a pro forma income income statement for the EBIT level solved;for in Part a. that shows that EPS will be the same regarless whether;Plan A or B is chosen.Complete the segment of the income statement;for Plan A below: (Round income statement amounts to the nearest dollar;except the EPS to the nearest cent.)Stock PlanEBIT $____________Less: interest expense $____________Earnings Before Taxes $_____________Less: Taxes at 38% $____________Net Income $_____________Number of common shares $_____________EPS $_____________Complete;the segment of the income statement for Plan B below: (round income;statement amount to the nearest dollar except the EPS to the nearest;cent.)Bond/Stock PanEBIT $____________Less: Interest expense $____________Earnings Before Taxes $_____________Less: Taxes at 38% $_____________Net Income $_______________Number of common shares $_____________EPS $

 

Paper#50933 | Written in 18-Jul-2015

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