D3) Finance Killer burgers capital structure consist of 30% debt 20% preferred stock and 50% common stock if killer raises new capital it's after-tax cost of debt will be 2.5% its cost of preferred stock will be 9% its cost of retained earnings will be 12.8% and it's cost of new common equity will be 13.8% killer must raise $180,000 if management expects the firm to generate $85,000 and retain earnings this year what is killers marginal cost of capital to raise the needed funds round your answer to two decimal places places

D3) Finance Killer burgers capital structure consist of 30% debt 20% preferred stock and 50% common stock if killer raises new capital it's after-tax cost of debt will be 2.5% its cost of preferred stock will be 9% its cost of retained earnings will be 12.8% and it's cost of new common equity will be 13.8% killer must raise $180,000 if management expects the firm to generate $85,000 and retain earnings this year what is killers marginal cost of capital to raise the needed funds round your answer to two decimal places places

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter12: The Cost Of Capital

Section: Chapter Questions

Problem 11P

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(b) The Chief financial officer of Kurdishy Oil has given you the assignment of estimating thefirm’s cost of capital. The present capital structure, which is considered optimal, is as follows:Market ValueDebt $40 millionPreferred stock 5 millionCommon equity 55 millionThe anticipated financing opportunities are:1) Debt can be issued with a 15 percent before-tax cost.2) Preferred stock will be $100 par, carry a dividend of 13 percent, and can be sold at $96per share.3) Common equity has a beta of 1.20, rM = 17% and rf = 12%.Kurdishy’s tax rate is 40%.(i) Calculate the after-tax cost of debt, cost of preferred stock and cost of equity of GalaxyOil. (ii) What is the cost of capital of Kurdishy Oil? (iii) The CEO of Kurdishy asks you about the company’s capital structure. She wants toknow why the company doesn't use more preferred stock financing as it costs less thandebt. What would you tell the president? [Note: Confine your answer to no more acouple of lines.]
Question1: Cybernauts, Ltd., is a new firm that wishes to finance an expansion program and determine its capital structure. It can issue 20 percent debt or 18 percent preferred stock. The total capitalization of the firm will be $6 million, and common stock can be sold at $25 per share. The company is expected to have a 50 percent tax rate. Four possible capital structures being considered are as follows: Plan Debt Preferred Common 1 20% 20% 60% 2 35 25 40 3 50 0 50 4 40 25 25 What would be the earnings per share for the four alternatives if earnings before interest and taxes are at $1.5 million?
Why Max Solutions's target capital structure calls for 40 percent debt, 10 percent preferred stock, and 50 percent common equity. WMS's current after-tax cost of debt is 6 percent, and it can sell as much debt as it wishes at this rate. The firm's cost of preferred stock is 11 percent, and its cost of retained earnings is 14 percent. The firm expects to generate $15,000 in retained earnings this year. A. Compute the weighted average cost of capital (WACC) if Why Max Solutions will rely only on Retained Earnings for the projected new year B. Should the firm exhaust its retained earnings, what will be the (WACC) breakpoint associated with raising funds through the issuance of new common stock? O 11.5%, $150,000 O 10%, $16,500 10.5%, $30,000 O 11%, $37,500
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You are analyzing the cost of capital for a firm that is financed with 60 percent equity and 50 percent debt . The cost of debt capital is 8 percent , while the cost of equity capital is 20 percent for the firm What is the overall cost of capital for the firm ? Select one A. 15.2 % B. None of these C. 20.2 % D.14.2 %
A company needed ghc 1000 to finance its activities. The firm can financed this expenditure either by bonds or equity. Interest rate on bonds is 10%. The company can earn ghc 160 in good years and ghc80 in bad years. Assuming the firm faces equal probability of good and bad years; i What will be the stream of returns on both bonds and equity if the company chooses the following financing options a 100% equity financing b 50% equity financing c 20% equity financing d 0% equity financing ii Estimate the equity risk associated with each option in (i) iii As an investor who wants to purchase a share in the company, which financing option will make you purchase the stock. Why????
You are analyzing the cost of capital for a firm that is financed with OMR 300 million of equity and OMR 200 million of debt . The cost of debt capital for the firm is 9 percent , while the cost of equity capital is 19 percent . What is the overall cost of capital for the firm ? Select one a . 18 % b . None of these c . 15 % d . 16 %
Lancaster Engineering Inc. (LEI) has the following capital structure, which it considers to be optimal:Debt 25% Preferred stock 15% Common equity 60% Total 100%LEI is expected to pay a dividend of $3.24 per share next year, its stock currently sells for $54 per share, and investors expect dividends to grow at a constant rate of 9 percent in the future. LEI’s tax rate is 40 percent.LEI can obtain new capital in the following ways:• New preferred stock with a dividend of $9.5 can be sold to the public at a price of $95 per share.• Debt can be sold at an interest rate of 12 percent.a. Determine the cost of each capital component.b. Calculate the WACC.3|Page4 c. LEI has the following investment opportunities that are average-risk projects for the firm:Project ABCDECost at t = 0$10,000 20,000 10,000 20,000 10,000Rate of Return16.4% 15.0% 13.2% 12.0% 11.5%Which projects should LEI accept? Why?
The Alex Corp. has a target capital structure of 40% debt and 60% equity. Its capital budget for next year is estimated to be US$40 million. Its estimated net income is US$30 million. If Alex follows a residual dividend policy, its dividend is expected to be: US$12 million US$18 million US$6 million Please write to text formet answer