Business, 10.12.2019 00:31 springcoates

Phillips equipment has 6,500 bonds outstanding that are selling at 96.5 percent of par. bonds with similar characteristics are yielding 6.7 percent, pretax. the company also has 48,000 shares of 5.5 percent preferred stock and 75,000 shares of common stock outstanding. the preferred stock sells for $64 a share. the common stock has a beta of 1.32 and sells for $41 a share. the preferred stock has a stated value of $100. the u. s. treasury bill is yielding 2.2 percent and the return on the market is 10.6 percent. the corporate tax rate is 21 percent. what is the weighted average cost of capital?

9.30 percent

8.09 percent

10.18 percent

8.64 percent

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Answers: 2

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Answer from: tori829

Ke = Rf + β(Rm – Rf)

ke = 2.2 + 1.32 (10.6 - 2.2)

Ke = 2.2 + 1.32(8.4)

ke = 2.2 + 11.088

ke = 13.288%

kp = D/Po

kp = $5.50/$64

Kp = 0.0859375 = 8.59375%

Kd = 6.7%

Kd after tax = 6.7(1-0.21) = 5.293

WACC = Ke(E/V) + kp(P/V) Kd(D/V)(1-T)

WACC = 13.288(3,075,000/12,419,500) + 8.59375(3,072,000/12,419500) + 5.293(6,272,500/12,419,500)

WACC = 3.29 + 2.126 + 2.6732

WACC = 8.09%

The correct answer is B

Market value of the company: $

Market value of equity = 75,000 x $41 = 3,075,000

Market value of preferred stock = 48,000 x $64 = 3.072,000

Market value of debt = 6500 x $96.5 = 6,272, 500

Market value of the company 12,419,500

The correct answer is B

Explanation:

In this question, we need to calculate cost of equity based on capital asset pricing model. Then, we will calculate cost of preferred stock as shown above. Thereafter, the after-tax cost of debt will be computed as illustrated above. We also need to calculate the market value of the company. Finally, we will calculate weighted average cost of capital as computed above.

Answer from: Quest

To be honest, here's what i think. i think the answer is (and i'm not exactly sure), that it is, both personal and household income.

Answer from: Quest

it's actually a very difficult task, due to not many people can make 2 million dollars in 2 years. besides that, to the not-so-realistic ideas, you can create a business. it could be practically anything, but make it into a business that isn't that known yet, you get me? also, lets not forget about stock market. that's where all the good stuff happens. use investments at the beginning and begin to raise up your business or whatever you're going to do. as this is a very non-realistic idea, it's still worth the shot!

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