Question

You have been given the following facts and assumptions concerning ABC Corp. at December 31, 2013....

You have been given the following facts and assumptions concerning ABC Corp. at December 31, 2013. Yield to maturity on long term government bond is 5.00%. Yield to maturity on company long term government bond is 7.0%.Coupon rate on company long term bond is 7.0%.Market price of risk is 8.0% along with estimated company beta value of 1.5.Stock is selling for $40 in the market and 250 million shares are outstanding. Assuming that book value of equity is $5240 million along with book value of interest bearing debt of $1250 million. Existing tax rate stands at 35%.Given all the information estimate the appropriate weight of debt to be used when calculating ABC Corp's weighted average cost of capital.

11.5%

19.3%

80.7%

11.11%

0 0
Add a comment Improve this question Transcribed image text
Request Professional Answer

Request Answer!

We need at least 10 more requests to produce the answer.

0 / 10 have requested this problem solution

The more requests, the faster the answer.

Request! (Login Required)


All students who have requested the answer will be notified once they are available.
Know the answer?
Add Answer to:
You have been given the following facts and assumptions concerning ABC Corp. at December 31, 2013....
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Similar Homework Help Questions
  • ABC Trucking's balance sheet shows a total of noncallable $38 million long-term debt with a coupon...

    ABC Trucking's balance sheet shows a total of noncallable $38 million long-term debt with a coupon rate of 5.60% and a yield to maturity of 8.80%. This debt currently has a market value of $55 million. The balance sheet also shows that the company has 12 million shares of common stock, and the book value of the common equity is $216.20 million. The current stock price is $20.10 per share; stockholders' required return, rs, is 14.15%; and the firm's tax...

  • I need help figuring out how to calculate cost of debt and equity. Question 2 Key...

    I need help figuring out how to calculate cost of debt and equity. Question 2 Key facts and assumptions concerning Organic Grocery at Sept 30, 2018, appear below. Using this information, answer the questions following, as of October 1, 2018. Facts and Assumptions Organic Grocery (WF) Instructions: Yield to maturity on short-term government bonds Yield to maturity on long-term government bonds Coupon rate on WF long term bonds, annual payment Maturity, long term bonds Current bond price Market risk premium...

  • You have the following information about Burgundy Basins, a sink manufacturer. Equity shares outstanding 20 million...

    You have the following information about Burgundy Basins, a sink manufacturer. Equity shares outstanding 20 million Stock price per share $ 30 Yield to maturity on debt 7.5 % Book value of interest-bearing debt $ 320 million Coupon interest rate on debt 3.5 % Market value of debt $ 200 million Book value of equity $ 320 million Cost of equity capital 10.0 % Tax rate 35 % Burgundy is contemplating what for the company is an average-risk investment costing...

  • help!! 4. Corporate Valuation Model ABC Corp. just reported Free Cash Flow (FCF) of $235.69 million...

    help!! 4. Corporate Valuation Model ABC Corp. just reported Free Cash Flow (FCF) of $235.69 million Managers expect that FCF will continue to grow at a constant rate of 4%. The firm also has some short-term marketable securities worth $50 million that are considered non-operating assets, so are not included in free cash flow. The firm has short-term debt in the form of notes payable of $150 million, long term debt of $500 million, and has issued preferred stock worth...

  • You have the following data on The Home Depot, Inc. Market value of long-term debt: $20,888...

    You have the following data on The Home Depot, Inc. Market value of long-term debt: $20,888 million Market value of common stock: $171,138 million Beta: 1.04 Yield to maturity on debt with 10 years to maturity: 2.167% Expected return on equity: 8.076% Marginal tax rate: 35% Assume that if Home Depot issues new bonds, the bonds will have 10 years to maturity. Suppose that managers at Home Depot decide to increase the proportion of debt to 20% of the value...

  • 1. You have the following data on The Home Depot, Inc. Market value of long-term debt:...

    1. You have the following data on The Home Depot, Inc. Market value of long-term debt: $20,888 million Market value of common stock: $171,138 million Beta: 1.12 Yield to maturity on debt with 10 years to maturity: 2.28% You also have the following market data: Expected annual return on the market portfolio: 8% Annual risk-free rate: 1% Assume that if Home Depot issues new bonds, the bonds will have 10 years to maturity. What is the company’s return on assets?...

  • For the most recent fiscal year, book value of long-term debt at Schlumberger was $10797 million....

    For the most recent fiscal year, book value of long-term debt at Schlumberger was $10797 million. The market value of this long-term debt is approximately equal to its book value. Schlumberger’s share price currently is $44.11. The company has 1,000 million shares outstanding. Managers at Schlumberger estimate that the yield to maturity on any new bonds issued by the company will be 13.65%. Schlumberger’s marginal tax rate would be 35%. Schlumberger’s beta is 0.77. Suppose that the expected return on...

  • For the most recent fiscal year, book value of long-term debt at Schlumberger was $10,203 million....

    For the most recent fiscal year, book value of long-term debt at Schlumberger was $10,203 million. The market value of this long-term debt is approximately equal to its book value. Schlumberger’s share price currently is $41.5. The company has 1,000 million shares outstanding. Managers at Schlumberger estimate that the yield to maturity on any new bonds issued by the company will be 10.63%. Schlumberger’s marginal tax rate would be 35%. Schlumberger’s beta is 0.74. Suppose that the expected return on...

  • Yield to call on a bond with a coupon rate of 8% paid semi-annually, 10 years...

    Yield to call on a bond with a coupon rate of 8% paid semi-annually, 10 years to maturity, a par value of $1,000 and a selling price of $1,071, callable after 5 years at $1,010 is A) 3.5%. B) 6.49%. C) 7.0%. D) 8.16%. Maria purchased $5,000 of no-load mutual fund shares just over a year ago. She received $136 in dividend income and $201 in long-term capital gains distributions. Today she sold her shares for $5,062. Maria is in...

  • You are given the following information for Golden Fleece Financial: Long-term debt outstanding Current yield to...

    You are given the following information for Golden Fleece Financial: Long-term debt outstanding Current yield to maturity (rdeb): Number of shares of common stock Price per share: Book value per share: Expected rate of return on stock (equity $330,000 796 11,500 $50.30 $28 14% Calculate Golden Fleece's company cost of capital. Ignore taxes. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Cost of capital

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT