Student: RITA MINION Instructor: THOMAS RINDAHL Date: 3/25/13 Course: FIN/370-03-05-13--section Time: 6:41 PM BSAM16ZRK4 Book: Titman/Martin/Keown: Financial Management: Principles and Applications
Assignment: Week Four Problems
1.
(Related to Checkpoint 14.1) (Weighted average cost of capital) The target capital structure for QM Industries is 37% common stock, 6% preferred stock, and 57% debt. If the cost of common equity for the firm is 17.6%, the cost of preferred stock is 10.9%, the before-tax cost of debt is 8.5%, and the firm's tax rate is 35%, what is QM's weighted average cost of capital?
QM's WACC is %. (Round to three decimal places.)
2. (Weighted average cost of capital) Crypton Electronics has a capital structure consisting of 42% , common stock and 58% debt. A debt issue of $1,000 par value, 5.8% bonds that mature in 15 years and pay annual interest will sell for $976. Common stock of the firm is currently selling for $30.15 per share and the firm expects to pay a $2.29 dividend next year. Dividends have grown at the rate of 5.1% per year and are expected to continue to do so for the foreseeable future. What is Crypton's cost of capital where the firm's tax rate is 30%? Crypton's cost of capital is E%. (Round to three decimal places.)
3, (Weighted average cost of capital) The target capital structure for Jowers Manufacturing is 51% common stock, 10%preferred stock, and 39% debt. If the cost of common equity for the firm is 19.8%, the cost of preferred stock is 11.9%, and the beforetax cost of debt is 10.1%, what is _lowers' cost of capital? The firm's tax rate is 34%.
Jowers' WACC is ri%. (Round to three decimal places.)
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