VanMannen Foundations, Inc. (VF)VanMannen Foundations, Inc. (VF) is a zero-growth company that currently has zero debt, and it has the data shown below.
EBIT =$80,000
Growth =0%
Orig cost of equity, rs =10.0%
No. of shares =10,000 Price per share = $60.00Tax rate =25%
?
Refer to the data for VanMannen Foundations, Inc. (VF). Now the company is considering using some debt, moving to the market value capital structure indicated below. The money raised would be used to repurchase stock. It is estimated that the increase in risk resulting from the additional leverage would cause the required rate of return on equity to rise somewhat, as indicated below. If this plan were carried out, what would be VF's new WACC and its new value of operations?
?
?
New interest rate = rd = 6.00% New cost of equity = rs =10.75% New Debt/Value = wd = 20% New Equity/Value = ws = 80%?
?
?
WACC Value
A. 9.50% $631,579
B. 9.80% $644,211
C. 10.10% $657,095
D. 10.40% $670,237
E. 10.70% $683,641
Answer: A
You might also like to view...
The most important issue facing online researchers in the United States is the lack of a broad cross section of consumers who have access to the Internet
Indicate whether the statement is true or false
Gentile’s Giving Voice to Values is meant to strengthen business students’ skills in what type of situation?
a. When negotiating for salary b. When instigating a change project c. When in a situation that runs counter to their principles d. When onboarding new employees
Regarding employer searches of employees at the workplace, which of the following is true?
a. generally, employers may conduct searches of employee workplaces, although obtaining consent is best b. all such searches should be conducted in a reasonable manner c. evidence obtained through searches must be handled carefully d. all of these are true
InterfaceInterface, a manufacturer of floor covering products, has recently entered into an agreement with Cargill, Inc. and Dow Chemical Company to develop a carpeting manufactured from corn fiber, rather than the traditional nylon. Interface hopes to develop a biodegradable carpet tile that will be sold to the public at prices only slightly higher than nylon carpet tiles. Interface's CEO has repeatedly said the mission of his company is to look for manufacturing materials that are renewable and are not petroleum dependent.Refer to Interface. Which of the following is the BEST example of a nonmarketing-controlled information source for floor tiling?
A. a store display showing the various colors of tiles available B. an ad in Better Homes & Gardens for floor tiles C. a salesperson at a store that specializes in floor coverings D. a brochure explaining why the corn-based floor tiles are superior to nylon ones E. a discussion with co-workers about the best floor tiles to buy