Carbon Fiber Design and Build Inc. is considering the purchase of new a new carbon molding machine for use in their Sports Operations department. The investment would be an expansion of an industry segment that the firm knows well
You have been tasked with helping the division manager determine the WACC in advance of an analysis of the expected cash flows for the project. You have collected the following information: The firm has no preferred stock outstanding and plans to issue new preferred stock. The estimated tax rate for the firm is 30%. The firm currently has 500 10-year $1,000 face value bonds outstanding with 7% semi-annual coupons that are selling for $1,036.35. The firm also has 31,888 shares of common stock outstanding at a price of $32.50 per share. You estimate that the market risk premium is 6%, the current yield to maturity on 10-year Treasury bonds is 3%, and the firm's beta is 0.95. Given this information, calculate the after-tax cost of debt, the cost of equity, and the firm's WACC.
Cost of debt via calculator: N = 20, PV = -$1,036.35, PMT = $35, FV = $1,000, solve for the rate = 3.25% x2 = annual rate of 6.50%
after-tax cost of debt = 6.5% * (1-.3 ) = 4.55%
Cost of equity via CAPM = 3% + 0.95 * 6% = 8.70%
Value of debt = 500 * $1,036.35 = $518,175
Value of equity = $32.50 * 31,888 = $1,036,360
Weight of debt = $518,175/$1,554,535 = .333
Weight of equity = $1,036,360/$1,554,535 = .667
WACC = .333 * 4.55% + .667 * 8.70% = 7.32%
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its half-gallon cartons is known as A. a brand extension. B. individual packaging. C. manufacturer branding. D. family packaging. E. multiple packaging.
All of the following will terminate a lease except the
a. condemnation of the leased premises. b. death of the landlord. c. destruction of the leased premises. d. end of the lease term.
The common law provides that an employer can escape liability for breach of duty if it can be established that the employee's own negligence contributed to the accident
Indicate whether the statement is true or false
All of the following are current strategic issues of particular concern to managers except:
A. hiring the right people to become more competitive on a global basis. B. hiring the right people for improving quality, innovation, and customer service. C. hiring the right people to become more competitive on a local basis. D. knowing the right people to retain after mergers, acquisitions, or downsizing. E. hiring the right people to apply new information technology for mobile business.