Answered step by step
Verified Expert Solution
Question
...
1 Approved Answer
6. The following data refers to Company Z: - Beta = 0.9 - Required return on debt (yield to maturity on a long term bond)
6. The following data refers to Company Z: - Beta = 0.9 - Required return on debt (yield to maturity on a long term bond) = 3.2% - Tax rate = 21% - 30-year government bond = 2.1% - Market risk premium can be assumed to be 5% Current Capitalization (Millions of USD) Currency Million USD Shares Price $ 36.7 Shares Outstanding 78.9 Market Capitalization 2,895.6 - Cash & Short Term Investments 29.0 + Total Debt 625.0 + Pref. Equity - + Total Minority Interest - =Total Enterprise Value (TEV) 3,491.6 Book Value of Common Equity 457.0 + Pref. Equity - + Total Minority Interest - + Total Debt 625.0 Total book capital 1,082.0 Estimate the cost of capital (WACC) for Company Z. (15 points) WACC =
6. The following data refers to Company Z: | ||||
- Beta = 0.9 | ||||
- Required return on debt (yield to maturity on a long term bond) = 3.2% | ||||
- Tax rate = 21% | ||||
- 30-year government bond = 2.1% | ||||
- Market risk premium can be assumed to be 5% | ||||
Current Capitalization (Millions of USD) | ||||
Currency | Million USD | |||
Shares Price | $ 36.7 | |||
Shares Outstanding | 78.9 | |||
Market Capitalization | 2,895.6 | |||
- Cash & Short Term Investments | 29.0 | |||
+ Total Debt | 625.0 | |||
+ Pref. Equity | - | |||
+ Total Minority Interest | - | |||
=Total Enterprise Value (TEV) | 3,491.6 | |||
Book Value of Common Equity | 457.0 | |||
+ Pref. Equity | - | |||
+ Total Minority Interest | - | |||
+ Total Debt | 625.0 | |||
Total book capital | 1,082.0 | |||
Estimate the cost of capital (WACC) for Company Z. (15 points) | ||||
WACC = |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-text-image.webp)
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Step: 3
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started