Calculate the WACC for the following data: A company raised $100,000,000. $50,00

Question

Calculate the WACC for the following data: A company raised $100,000,000. $50,000,000 came from the sale of bonds which have a current yield of 8%. $25,000,000 came from the sale of common stock which has a cost equal to 9%. The final $25,000,000 came from the sale of preferred stock which has a cost equal to 10%. The company's tax rate is 30%.

Question 32 options:

7.55%

9.17%

9.00%

8.00%

Save

Question 33 (1 point)

Which form of the efficient market hypothesis causes one to believe that there is an advantage to insider trading, based on insider information?

Question 33 options:

Weak form

Private information form

Semi-strong form

Strong form

Save

Question 34 (1 point)

For the following cash flows, calculate the NPV based on a cost of capital of 15%: Investment of $25,000; Year1: $11,000; Year2: $7,000; Year3: -$3,000; Year 4: $19,000

Question 34 options:

-$2,278.52

$3,552.00

$765.00

-$1,251.01

Save

Question 35 (1 point)

If you have a cost of capital of 12% and your project yields a negative NPV, what can you say for certain about the project?

Question 35 options:

The project will have an IRR below 12%.

The project will have an IRR equal to 12%.

The project should be accepted.

The project will have an IRR above 12%.

Save

Question 36 (1 point)

You invest in a project that has a depreciable asset. The asset is depreciable under the 5-year MACRS category. The depreciation percentages for all six years are: 0.20, 0.32, 0.192, 0.115, 0.115, 0.058. On an asset worth $125,000, how much depreciation do you get to claim in year 4?

Question 36 options:

$24,000

$14,375

$40,000

$7,250

A)

7.55%

B)

9.17%

C)

9.00%

D)

8.00%

Explanation / Answer

WACC = (Weight of debt x After tax cost of debt) + (Weight of equity x Cost of equity) + (Weight of preferred stock x cost of preferred stock)

After tax cost of debt = 8% x (1-30%) => 0.08 x 0.7 = 0.056 or 5.6%

WACC = [($50,000,000/$100,000,000) x 0.056] + [($25,000,000/$100,000,000) x 0.09] + [($25,000,000/$100,000,000) x 0.10] = 0.0755 or 7.55%

So, option A is correct.

33) Semi-strong form of efficient market doesn’t incorporate information available inside of a company, so it can be advantageous for insiders trading.

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.