Baker's Footwear has 8,000 shares of common stock outstanding at a price per share of $64 and a rate of return of 15 percent. The firm has 2,000 shares of 6 percent preferred stock outstanding at a price of $54 a share. The preferred stock has a par value of $100. The outstanding debt has a total face value of $100,000 and a market price equal to 102 percent of face value. The yield-to-maturity on the debt is 9.36 percent. What is the firm's weighted average cost of capital if the tax rate is 35 percent?

Baker's Footwear has 8,000 shares of common stock outstanding at a price per share of $64 and a rate of return of 15 percent. The firm has 2,000 shares of 6 percent preferred stock outstanding at a price of $54 a share. The preferred stock has a par value of $100. The outstanding debt has a total face value of $100,000 and a market price equal to 102 percent of face value. The yield-to-maturity on the debt is 9.36 percent. What is the firm's weighted average cost of capital if the tax rate is 35 percent?

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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A firm has 1 million shares outstanding with a book value per share of $10 per share. The stock sells for a price of $20 per share. The firm’s bonds have a par value of $8 million and are currently selling at a price of 120 percent of par. What is the appropriate proportion of equity to use in the WACC calculation? 71.4 percent 51.0 percent 55.6 percent 48.0 percent 67.6 percent
Today's Technology has 24,500 shares of common stock outstanding at a price per share of $64 and a rate of return of 13.75 percent. The firm has 6,550 shares of 6.30 percent preferred stock outstanding at a price of $87.50 per share. The preferred stock has a par value of $100. The outstanding debt has a total face value of $359,000 and currently sells for 103.5 percent of face. The yield to maturity on the debt is 7.63 percent. What is the firm's weighted average cost of capital if the tax rate is 35 percent?
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Big Industries has the following market-value balance sheet. The stock currently sells for $20 a share, and there are 1,300 shares outstanding. The firm will either pay a $1 per share dividend or repurchase $1,300 worth of stock. Ignore taxes. Assets Liabilities and Equity Cash $ 8,000 Debt $ 11,500 Fixed assets 29,500 Equity 26,000 a. What will be the subsequent price per share if the firm pays a dividend? b. What will be the subsequent price per share if the firm repurchases stock? (Round your answer to the nearest dollar.) c. If total earnings of the firm are $32,300 a year, find earnings per share if the firm pays a dividend. (Do not round intermediate calculations. Round your answer to 3 decimal places.) d. If total earnings of the firm are $32,300 a year, now find earnings per share if the firm repurchases stock. (Do not round intermediate calculations. Round your answer to 3 decimal places.) e. If total earnings of the firm are $32,300 a year,…
A firm has 29,000 shares of common outstanding with a market value of $45.5 per share and a book value of $26 per share. The firm also has 7,000 shares of preferred stock with a book value of $13.7 and a market value that's 99% of the book value. The firm has a $763,000 face value bond outstanding that is selling at 117% of par. What weight (P/V) should be placed on the preferred stock when computing the firm's WACC?

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