Consider Higgins Production which has the following information about its capital structures: Debt - 1,500, 5 percent coupon bonds outstanding, $1,000 par value, 7 years to maturity, selling for 80 percent of par, the bonds make semi-annual payments Common Stock - 100,000 shares outstanding, selling for $45 per share; the beta is 0.80 Preferred Stock - 25,000 shares of 6 percent preferred stock outstanding, currently selling for $150 per share Market Information - 6 percent market risk premium and 4 percent risk-free rate. Required: Calculate the following if the company has a tax rate of 36 percent. Show all working. i. Total Market Value for the Firm ii. After-tax cost of Debt iii. Cost of Equity iv. Cost of Preferred Stock v. Weighted Average Cost of Capital

Consider Higgins Production which has the following information about its capital structures: Debt - 1,500, 5 percent coupon bonds outstanding, $1,000 par value, 7 years to maturity, selling for 80 percent of par, the bonds make semi-annual payments Common Stock - 100,000 shares outstanding, selling for $45 per share; the beta is 0.80 Preferred Stock - 25,000 shares of 6 percent preferred stock outstanding, currently selling for $150 per share Market Information - 6 percent market risk premium and 4 percent risk-free rate. Required: Calculate the following if the company has a tax rate of 36 percent. Show all working. i. Total Market Value for the Firm ii. After-tax cost of Debt iii. Cost of Equity iv. Cost of Preferred Stock v. Weighted Average Cost of Capital

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter12: The Cost Of Capital

Section: Chapter Questions

Problem 17P

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Consider Higgins Production which has the following information about its capital structures: Debt - 1,500, 5 percent coupon bonds outstanding, $1,000 par value, 7 years to maturity, selling for 80 percent of par, the bonds make semi-annual payments Common Stock - 100,000 shares outstanding, selling for $45 per share; the beta is 0.80 Preferred Stock - 25,000 shares of 6 percent preferred stock outstanding, currently selling for $150 per share Market Information - 6 percent market risk premium and 4 percent risk-free rate. Required: Calculate the following if the company has a tax rate of 36 percent. Total Market Value for the Firm ii. After-tax cost of Debt iii. Cost of Equity iv. Cost of Preferred Stock…
Consider Higgins Production which has the following information about its capital structures: Debt - 1,500, 5 percent coupon bonds outstanding, $1,000 par value, 7 years to maturity, selling for 80 percent of par, the bonds make semi-annual payments  Common Stock - 100,000 shares outstanding, selling for $45 per share; the beta is 0.80  Preferred Stock - 25,000 shares of 6 percent preferred stock outstanding, currently selling for $150 per share  Market Information - 6 percent market risk premium and 4 percent risk-free rate. Required: Calculate the following if the company has a tax rate of 36 percent. i. Total Market Value for the Firm ii. After-tax cost of Debt iii. Cost of Equity iv. Cost of Preferred Stock v. Weighted Average Cost of Capital
Consider Higgins Production which has the following information about its capital structures: Debt - 1,500, 5 percent coupon bonds outstanding, $1,000 par value, 7 years to maturity, selling for 80 percent of par, the bonds make semi-annual payments  Common Stock - 100,000 shares outstanding, selling for $45 per share; the beta is 0.80  Preferred Stock - 25,000 shares of 6 percent preferred stock outstanding, currently selling for $150 per share  Market Information - 6 percent market risk premium and 4 percent risk-free rate. Required: Calculate the following if the company has a tax rate of 36 percent. iv. Cost of Preferred Stock v. Weighted Average Cost of Capital
Consider Higgins Production which has the following information about its capital structures:Debt - 1,500, 5 percent coupon bonds outstanding, $1,000 par value, 7 years to maturity, selling for80 percent of par, the bonds make semi-annual payments Common Stock - 100,000 shares outstanding, selling for $45 per share; the beta is 0.80 Preferred Stock - 25,000 shares of 6 percent preferred stock outstanding, currently sellingfor $150 per share Market Information - 6 percent market risk premium and 4 percent risk-free rate.Required: Calculate the following if the company has a tax rate of 36 percent. Total Market Value for the Firm After-tax cost of Debt Cost of Equity Cost of Preferred Stock Weighted Average Cost of Capital
Consider Higgins Production which has the following information about its capital structures:Debt - 1,500, 5 percent coupon bonds outstanding, $1,000 par value, 7 years to maturity, selling for80 percent of par, the bonds make semi-annual payments Common Stock - 100,000 shares outstanding, selling for $45 per share; the beta is 0.80 Preferred Stock - 25,000 shares of 6 percent preferred stock outstanding, currently sellingfor $150 per share Market Information - 6 percent market risk premium and 4 percent risk-free rate.Required: Calculate the following if the company has a tax rate of 36 percent.Cost of Equity Weighted Average Cost of Capital
Consider Higgins Production which has the following information about its capital structures:Debt - 1,500, 5 percent coupon bonds outstanding, $1,000 par value, 7 years to maturity, selling for80 percent of par, the bonds make semi-annual payments Common Stock - 100,000 shares outstanding, selling for $45 per share; the beta is 0.80 Preferred Stock - 25,000 shares of 6 percent preferred stock outstanding, currently sellingfor $150 per share Market Information - 6 percent market risk premium and 4 percent risk-free rate. i. Cost of Preferred Stockii. Weighted Average Cost of Capital
consider huggins product has the following information about its capital structures: Debt - 1,500, 5 percent coupon bonds outstanding, $1,000 par value, 7 years to maturity, selling for 80 percent of par, the bonds make semi-annual payments Common Stock - 100,000 shares outstanding, selling for $45 per share; the beta is 0.80 Preferred Stock - 25,000 shares of 6 percent preferred stock outstanding, currently selling for $150 per share Market Information - 6 percent market risk premium and 4 percent risk-free rate. Calculate the following if the company has a tax rate of 36 percent: Total Market Value for the Firm , After-tax cost of Debt, Cost of Equity , Cost of Preferred Stock, Weighted Average Cost of Capital. showing both percentages and dollar value for After-tax cost of Debt, Cost of Equity and Cost of Preferred Stock should all be calculated in dollar value and NOT percentages.
Consider Huggins Production which has the following information about its capital structures: Debt - 1,500, 5 percent coupon bonds outstanding, $1,000 par value, 7 years to maturity, selling for 80 percent of par, the bonds make semi-annual payments Common Stock - 100,000 shares outstanding, selling for $45 per share; the beta is 0.80 Preferred Stock - 25,000 shares of 6 percent preferred stock outstanding, currently selling for $150 per share Market Information - 6 percent market risk premium and 4 percent risk-free rate. Required: Calculate the following if the company has a tax rate of 36 percent. 1. Total Market Value for the Firm 2. After-tax cost of Debt 3. Cost of Equity
Consider Huggins Production which has the following information about its capital structures: Debt - 1,500, 5 percent coupon bonds outstanding, $1,000 par value, 7 years to maturity, selling for 80 percent of par, the bonds make semi-annual payments Common Stock - 100,000 shares outstanding, selling for $45 per share; the beta is 0.80 Preferred Stock - 25,000 shares of 6 percent preferred stock outstanding, currently selling for $150 per share Market Information - 6 percent market risk premium and 4 percent risk-free rate. Required: Calculate the following if the company has a tax rate of 36 percent. 1. Cost of Preferred Stock 2. Weighted Average Cost of Capital
Consider Higgins Production which has the following information about its capital structures: Debt - 1,500, 5 percent coupon bonds outstanding, $1,000 par value, 7 years to maturity, selling for 80 percent of par, the bonds make semiannual payments  Common Stock - 100,000 shares outstanding, selling for $45 per share; the beta is 0.80  Preferred Stock - 25,000 shares of 6 percent preferred stock outstanding, currently selling for $150 per share  Market Information - 6 percent market risk premium and 4 percent risk-free rate. Required: Calculate to the following if the company has a tax rate of 36 percent. WHAT IS Cost of Equity ?
Consider Higgins Production which has the following information about its capital structures: Debt - 1,500, 5 percent coupon bonds outstanding, $1,000 par value, 7 years to maturity, selling for 80 percent of par, the bonds make semiannual payments  Common Stock - 100,000 shares outstanding, selling for $45 per share; the beta is 0.80  Preferred Stock - 25,000 shares of 6 percent preferred stock outstanding, currently selling for $150 per share  Market Information - 6 percent market risk premium and 4 percent risk-free rate. The WACC of the company is: a. 5.67% b. 8.8% c. 6.57% d. 6.23%
2. Consider Higgins Production which has the following information about its capital structures: Debt - 1,500, 5 percent coupon bonds outstanding, $1,000 par value, 7 years to maturity, selling for 80 percent of par, the bonds make semi-annual payments  Common Stock - 100,000 shares outstanding, selling for $45 per share; the beta is 0.80  Preferred Stock - 25,000 shares of 6 percent preferred stock outstanding, currently selling for $150 per share  Market Information - 6 percent market risk premium and 4 percent risk-free rate. Required: Calculate the following if the company has a tax rate of 36 percent. iii. Cost of Equityiv. Cost of Preferred Stockv. Weighted Average Cost of Capital PLEASE SHOW WORKINGS CLEARLY