$5.00 The 100% A+ answers for Questions 1 - 5.
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Preview: ... ct B is of below-average risk and has a ret ...
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$18.00 Answers highlighted in bold and underlined + Answer to essay-type question 8
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- Posted on May 09, 2009 at 2:50:58PM
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Preview: ... erlined + Answe ...
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$10.00 Comprehensive explanations for all answers, all in Excel so that you can see all calculations and formulas
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Preview: ... Debt 30% <br> Target Equity 70% <br> <br> Cost of Debt (annual) 8.1% Use the RATE() function to find the cost of debt <br> Return on Equity 13.5% Use CAPM to determine cost of equity <br> WACC 10.91% Plug in the target capital structure, tax rate, cost of debt, and cost of equity to calculate the WACC <br> <br> <br>4 WACC 10% <br> Below-Avg Risk WACC 8% <br> Above-Avg Risk WACC 12% <br> Use the average WACC's as the hurdle rates for accepting/denying projects. For instance, if an above-avreage risk project has a return of 13%, then we know that it has a greater return than 12%, so it should be accepted. For t ...
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8 Questions- Finance.xls (26K)
$15.00 Unit 7_finance
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Preview: ... u as a consultant to estimate the company’s WACC. You have obtained the following information. (1) Tapley's bonds mature in 25 years, have a 7.5% annual coupon, a par value of $1,000, and a market price of $936.49. (2) The company’s tax rate is 40%. (3) The risk-free rate is 6.0%, the market risk premium is 5.0%, and the stock’s beta is 1.5. (4) The target capital structure consists of 30% debt and 70% equity. Tapley uses the CAPM to estimate the cost of equity, and it does not expect to have to issue any new common stock. What is its WACC?<br>(Points: 5)<br> 9.89%<br> 10.01%<br> 10.35%<br> 10.64%<br> 10.91%<br><br>Par value = 1,000<br>Coupon interest (8%/4) 75<br>PV = -936.49<br>No. of years = 25<br>Cost of debt 8.1%<br>After tax cost of debt = 4.86%<br><br>Cost of common stock = r RF + (r M – r RF) b<br> = 6% + (5%) 1.5<br> = 13.5%<br><br>WACC = 4.86% x 30% + 13.5% x 70%<br> = 10.91%<br><br>4. <br>Wagner Inc estimates that its average-risk projects have a WACC of 10%, its below-average risk projects have a WACC of 8%, and its above-average risk projects have a WACC of 12%. Which of the following projects (A, B, and C) should the company accept?<br>(Points: 5) <br> Project A is of average risk and has a return of 9%.<br> Project B is of below-average risk and has a return of 8. ...
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