48The Sunland Products Co. currently has debt with a market value of $300 million outstanding. The debt consists of 9 percent couponbonds (semiannual coupon payments) which have a maturity of 15 years and are currently priced at $1,434.63 per bond. The firm alsohas an issue of 2 million preferred shares outstanding with a market price of $10 per share. The preferred shares pay an annualdividend of $1.20. Sunland also has 14 million shares of common stock outstanding with a price of $20.00 per share. The firm isexpected to pay a $2.20 common dividend one year from today, and that dividend is expected to increase by 5 percent per yearforever. If Sunland is subject to a 40 percent marginal tax rate, then what is the firm's weighted average cost of capital?Excel Template(Note: This template includes the problem statement as it appears in your textbook. The problem assigned to you here may havedifferent values. When using this template, copy the problem statement from this screen for easy reference to the values you'vebeen given here, and be sure to update any values that may have been pre-entered in the template based on the textbook versionof the problem.)Your AnswerCorrect AnswerCalculate the weights for debt, common equity, and preferred equity. (Round intermediate calculations and final answers to 4decimal places, e.g. 1.2514.)DebtPreferred equityCommon equity Preferred equityCommon equityeTextbook and MediaYour AnswerCorrect AnswerCalculate the yield to maturity of the debt. (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and finalanswer to 2 decimal places, e.g. 15.25%.)Yield to maturity of the debteTextbook and MediaYour Answer Correct Answerdo%Calculate the cost of preferred equity. (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer

WACC stands for Weighted Average Cost of Capital. It is a financial metric that calculates the…

Answered: The Sunland Products Co. currently has…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter6: Fixed-income Securities: Characteristics And Valuation

Section: Chapter Questions

Problem 17P

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Neubert Enterprises recently issued $1,000 par value 15-year bonds with a 5% coupon paid annually and warrants attached. These bonds are currently trading for $1,000. Neubert also has outstanding $1,000 par value 15-year straight debt with a 7% coupon paid annually, also trading for $1,000. What is the implied value of the warrants attached to each bond?
The Imaginary Products Co. currently has debt with a market value of $300 million outstanding. The debt consists of 9% coupon bonds(semiannual coupon payments) which have a maturity of 15 years and are currently priced at $1,440.03 per bond. The firm also has an issue of 2 million preferred shares outstanding with a market price of $12.00 per share. The preferred shares pay an annual dividend of $1.20. Imaginary also has 14 million shares of common stock outstanding with a price of $20.00 per share. The firm is expected to pay a $2.20 common dividend one year from today, and that dividend is expected to increase by 5% per year forever. If Imaginary is subject to a 40% marginal tax rate, then what is the firm's weighted average cost of capital?
The Cullumber Products Co. currently has debt with a market value of $300 million outstanding. The debt consists of 9 percent coupon bonds (semiannual coupon payments) which have a maturity of 15 years and are currently priced at $1,429.26 per bond. The firm also has an issue of 2 million preferred shares outstanding with a market price of $20 per share. The preferred shares pay an annual dividend of $1.20. Cullumber also has 14 million shares of common stock outstanding with a price of $20.00 per share. The firm is expected to pay a $2.20 common dividend one year from today, and that dividend is expected to increase by 6 percent per year forever. If Cullumber is subject to a 40 percent marginal tax rate, then what is the firm’s weighted average cost of capital? Calculate the weights for debt, common equity, and preferred equity. (Round intermediate calculations and final answers to 4 decimal places, e.g. 1.2514.) Debt Preferred equity Common equity
The Pharoah Products Co. currently has debt with a market value of $250 million outstanding. The debt consists of 9 percent coupon bonds (semiannual coupon payments) that have a maturity of 15 years and are currently priced at $1,055.90 per bond. The firm also has an issue of 2 million preferred shares outstanding with a market price of $15 per share. The preferred shares pay an annual dividend of $1.20. Pharoah also has 14 million shares of common stock outstanding with a price of $20.00 per share. The firm is expected to pay a $2.20 common dividend one year from today, and that dividend is expected to increase by 6 percent per year forever. If Pharoah is subject to a 28 percent marginal tax rate. Calculate the appropriate cost of capital for a new project that is financed with the same proportion of debt, preferred shares, and common shares as the firm's current capital structure. Assume that the project has the same degree of systematic risk as the average project that the firm is…
The Wildhorse Products Co. currently has debt with a market value of $200 million outstanding. The debt consists of 9 percent coupon bonds (semiannual coupon payments) which have a maturity of 15 years and are currently priced at $1,434.63 per bond. The firm also has an issue of 2 million preferred shares outstanding with a market price of $16 per share. The preferred shares pay an annual dividend of $1.20. Wildhorse also has 14 million shares of common stock outstanding with a price of $20.00 per share. The firm is expected to pay a $2.20 common dividend one year from today, and that dividend is expected to increase by 5 percent per year forever. If Wildhorse is subject to a 40 percent marginal tax rate, then what is the firm's weighted average cost of capital? Excel Template (Note: This template includes the problem statement as it appears in your textbook. The problem assigned to you here may have different values. When using this template, copy the problem statement from this…
The Ivanhoe Products Co. currently has debt with a market value of $250 million outstanding. The debt consists of 9 percent coupon bonds (semiannual coupon payments) that have a maturity of 15 years and are currently priced at $1423.92 per bond. The firm also has an issue of 2 million preferred shares outstanding with a market price of $15.00 per share. The preferred shares pay an annual dividend of $1.20. Ivanhoe also has 14 million shares of common stock outstanding with a price of $20.00 per share. The firm is expected to pay a $2.20 common dividend one year from today, and that dividend is expected to increase by 4 percent per year forever. If Ivanhoe is subject to a 28 percent marginal tax rate. Calculate the weights for debt, common equity, and preferred equity. (Round final answers to 4 decimal places)
The Sandhill Products Co. currently has debt with a market value of $250 million outstanding. The debt consists of 9 percent coupon bonds (semiannual coupon payments) which have a maturity of 15 years and are currently priced at $1,418.61 per bond. The firm also has an issue of 2 million preferred shares outstanding with a market price of $14 per share. The preferred shares pay an annual dividend of $1.20. Sandhill also has 14 million shares of common stock outstanding with a price of $20.00 per share. The firm is expected to pay a $2.20 common dividend one year from today, and that dividend is expected to increase by 4 percent per year forever. If Sandhill is subject to a 40 percent marginal tax rate, then what is the firm’s weighted average cost of capital? Calculate the weights for debt, common equity, and preferred equity. (Round intermediate calculations and final answers to 4 decimal places, e.g. 1.2514.) Debt Preferred equity Common equity
MoMahon Ltd currently has $300 million of market value debt outstanding. The 9 percent coupon bonds (semi-annual pay) have a maturity of 15 years and are currently priced at $1,550.04 per bond. The face value of the bond is $1,000. The company also has an issue of 1 million preference shares outstanding with a market price of $24.00. The preference shares offer an annual dividend of $2.40. McMahon Ltd also has 7 million ordinary shares outstanding with a price of $40.00 per share. The company is expected to pay a $4.4 ordinary dividend one year from today, and that dividend is expected to increase by 6 per cent per year forever. If the corporate tax rate is 30 per cent, then what is the company’s weighted average cost of capital (WACC)?
SantiZerLtd currently has $200 million of market value debt outstanding. The 9 per cent coupon bonds (semi-annual pay) have a maturity of 15 years, a face value of $1000 and are currently priced at $1,024.87 per bond. The company also has an issue of 2 million preference shares outstanding with a market price of $20. The preference shares offer an annual dividend of $1.20. Santi Zer also has 14 million ordinary shares outstanding with a price of $20.00 per share. The company is expected to pay a $2.20 ordinary dividend 1 year from today, and that dividend is expected to increase by 7 per cent per year forever. If the corporate tax rate is 40 per cent, then what is the company’s weighted average cost of capital?
Nevada Mining Co. has only long term debt of $600. This debt consist of long term bond which has following features: face value is $1000, time to maturity is 40 years, and annual coupon rate is 0.13. These bond is currently traded in the market at a price of $1,505. Regarding the equity, the current stock price of the shares are $59 and the firms has 13 shares outstanding. Nevada Mining Co. is planning to distribute $11 dividend per share and these dividends are expected to grow 0.06 each year. If the tax rate of Nevada Mining Co. is 0.40, calculate the WACC. Show your steps in your calculations. Please answer in detail use formulae step by step answer
Carbon Research Corporation currently has the following capital structure: Bonds: 40,000 of the company’s 9.5% semi-annual coupon bonds outstanding (Par value = $1,000). These bonds are currently priced at $1,280 per bond and will mature in 20 years. Preferred shares: The company has an issue of 1.2 million preferred shares outstanding with a market price of $10.95. The preferred shares offer an annual dividend of $1.05. Common stock: The company has 2.5 million shares of common stock outstanding with a price of $26.00 per share. The company is expected to pay a $2.50 common dividend one year from today, and that dividend is expected to increase by 5 percent per year forever. The company typically pays flotation costs of 2% of the price on all newly issued securities. If the company is subject to a 28 percent marginal tax rate, what is the company’s after-tax, flotation-cost adjusted weighted average cost of capital? Show all steps and calculations clearly. Cost of preferred…
Carbon Research Corporation currently has the following capital structure: Bonds: 40,000 of the company’s 9.5% semi-annual coupon bonds outstanding (Par value = $1,000). These bonds are currently priced at $1,280 per bond and will mature in 20 years. Preferred shares: The company has an issue of 1.2 million preferred shares outstanding with a market price of $10.95. The preferred shares offer an annual dividend of $1.05. Common stock: The company has 2.5 million shares of common stock outstanding with a price of $26.00 per share. The company is expected to pay a $2.50 common dividend one year from today, and that dividend is expected to increase by 5 percent per year forever. The company typically pays flotation costs of 2% of the price on all newly issued securities. If the company is subject to a 28 percent marginal tax rate, what is the company’s after-tax, flotation-cost adjusted weighted average cost of capital? Show all steps and calculations clearly. Present all…

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