Below is a simplified balance sheet for Rensselaer Felt. Calculate this company’
ID: 2613241 • Letter: B
Question
Below is a simplified balance sheet for Rensselaer Felt. Calculate this company’s WACC. The debt has just been refinanced at an interest rate of 6% (short term) and 8% (long term). The expected rate of return on the company’s shares is 15%. There are 7.46M shares outstanding, and the shares are trading at $46. The tax rate is 35%. (Figures in thousands)
Cash and marketable Securities
1,500
Short –term Debt
75,600
Accounts Receivable
120,000
Accounts payable
62,000
Inventories
125,000
Current Liabilities
137,600
Current assets
246,500
Long Term Debt
208,600
Property, plant, equipment
302,000
Deferred Taxes
45,000
Other Assets
89,000
Shareholders’ equity
246,300
Total
637,500
Total
637,500
I need all formula’s shown.
Cash and marketable Securities
1,500
Short –term Debt
75,600
Accounts Receivable
120,000
Accounts payable
62,000
Inventories
125,000
Current Liabilities
137,600
Current assets
246,500
Long Term Debt
208,600
Property, plant, equipment
302,000
Deferred Taxes
45,000
Other Assets
89,000
Shareholders’ equity
246,300
Total
637,500
Total
637,500
Explanation / Answer
3.90
[6(1-.35)]
5.20%
[8(1-.35)]
WACC = 10.40%
value (millions) Weights = [value /total] cost weighted cost After tax Short term debt 75.60 .12050 [75.60/627.36]3.90
[6(1-.35)]
.46995 After tax long term debt 208.60 .33250 [208.60/627.36]5.20%
[8(1-.35)]
1.729 equity 343.16 [7.46*46] .54700 [343.16/627.36] 15% 8.205 Total 627.36 WACC 10.40%Related Questions
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