Question
Can someone please show me how to do these in excel and show your work for better understanding? Lowes has 80 bonds outstanding that are
Can someone please show me how to do these in excel and show your work for better understanding?
Lowes has 80 bonds outstanding that are selling at their par value of $1,000 each. Bonds with similar characteristics are yielding a pretax 8.6 percent. The firm also has 4,000 shares of common stock outstanding. The stock has a beta of 1.1 and sells for $40 a share. The U.S. T-bill is yielding 5 percent, the market risk premium is 8 percent, and the firm's tax rate is 21 percent. What is the firm's weighted average cost of capital assuming its earnings are sufficient to classify all interest as a tax-deductible expense?
7.80 percent
9.87 percent
12.07 percent
10.10 percent
11.46 percent
Lowes is considering acquiring XYZ and has compiled this information on XYZ:
Year | 1 | 2 | 3 | ||||||
EBIT | $ | 318,000 | $ | 364,000 | $ | 392,000 | |||
Capital spending | 46,500 | 28,000 | 36,200 | ||||||
Increases in net working capital | 5,500 | 6,500 | 1,200 | ||||||
Depreciation | 34,000 | 32,100 | 28,700 | ||||||
The applicable tax rate is 21 percent and the terminal value of XYZ as of Year 3 is $2.6 million. What is the NPV of this acquisition if the discount rate is 7.1 percent and the acquisition cost is $2.25 million?
$633,499
$577,801
$437,496
$773,804
$496,399
Lowe's common stock has a beta of 1.37, the risk-free rate is 3.4 percent, and the market risk premium is 8.2 percent. The yield to maturity on the firm's bonds is 8.6 percent and the debt-equity ratio is .45. What is the WACC if the tax rate is 23 percent and all interest is tax deductible?
11.03 percent
11.92 percent
11.91 percent
12.15 percent
12.76 percent
Thank you in advance!
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