I ONLY NEED THE ANSWERS FOR THE PROBLEM UNDER "HW" AT THE BOTTOM
2. Obtain the market value capital structure (and weights) of the firnm Price of Pfd is $32, and for common stock is $8.80. What is the price of the bond? Bond is selling to yield 10%. Bond is 10 year, 8% coupon; N-10:-10, PMT-80, FV : 1000, PV-$877.11. Shares Outstandin Price Value $ 1,052,532 Bonds Pfd stock Commorn 1,200 10,000 300,000 $877.11 32.00 8.80 Weight 0.2623 0.0798 0.6579 320,000 2,640,000 $4,012,532 Total> 3.Based on market value capital structure, what is the WACC? Product 0.0157 0.0099 0.1752 20.09% Bonds Pfd stock Commorn Weight (from #2) 0.2623 0.0798 0.6579 Costs (from #1) 6.00% 12.50% 26.63% WACC> 4.What is the WACC, based on book value capital structure? Weight 0.75 0.0625 0.1875 Costs Bonds Pfd stock Common 6.00% 12.50% 26.63% WACC-> Product 0.0450 0.0078 0.0499 10.27% If you have a choice, use market value weights rather than book value weights 5.Real world complication arise with floatation cost. Debt New bonds have a floatation cost of 11.7% of the market price. ABC's Net Price when issuing a new bond is $ 774.49 - 877.11 * (1-.117)). The cost of debt; N-10, PV-774.49, PMT- 80, FV -1,000. I-rD-1 1.99% 12%. After-tax cost of debt 12%*(1-t)-7.20% Pfd: Floatation cost is $5/share. Net price is $32. $5 = $27. Cost of Pfd = $ 4/$27 = 14.81% Common: Floatation cost is 8% of the market price. Net price-$8.80*(1-08)-$8.10. The cost of common stock is-DiPo + g-28.07% WACC including floatation costs and market value weight is 21.54% HW: 1. Bond price $ 850; Pfd price - $ 35, and Stock Price- $12. Based on these market prices and the number of shares shown in #2 above, compute the market value weights 2. Floatation costs. Bond 6%, Pfd stock 9%, and common stock 0%. Compute the cost of bonds and pfd stock similar to #5 above, using the floatation costs. New common stock has a -12. -496, Market risk premium-6% Compute the component costs inclusive of floatation. Using the market value weights from previous, what is the WACC of the firm (similar to #3 above)? 2. Obtain the market value capital structure (and weights) of the firnm Price of Pfd is $32, and for common stock is $8.80. What is the price of the bond? Bond is selling to yield 10%. Bond is 10 year, 8% coupon; N-10:-10, PMT-80, FV : 1000, PV-$877.11. Shares Outstandin Price Value $ 1,052,532 Bonds Pfd stock Commorn 1,200 10,000 300,000 $877.11 32.00 8.80 Weight 0.2623 0.0798 0.6579 320,000 2,640,000 $4,012,532 Total> 3.Based on market value capital structure, what is the WACC? Product 0.0157 0.0099 0.1752 20.09% Bonds Pfd stock Commorn Weight (from #2) 0.2623 0.0798 0.6579 Costs (from #1) 6.00% 12.50% 26.63% WACC> 4.What is the WACC, based on book value capital structure? Weight 0.75 0.0625 0.1875 Costs Bonds Pfd stock Common 6.00% 12.50% 26.63% WACC-> Product 0.0450 0.0078 0.0499 10.27% If you have a choice, use market value weights rather than book value weights 5.Real world complication arise with floatation cost. Debt New bonds have a floatation cost of 11.7% of the market price. ABC's Net Price when issuing a new bond is $ 774.49 - 877.11 * (1-.117)). The cost of debt; N-10, PV-774.49, PMT- 80, FV -1,000. I-rD-1 1.99% 12%. After-tax cost of debt 12%*(1-t)-7.20% Pfd: Floatation cost is $5/share. Net price is $32. $5 = $27. Cost of Pfd = $ 4/$27 = 14.81% Common: Floatation cost is 8% of the market price. Net price-$8.80*(1-08)-$8.10. The cost of common stock is-DiPo + g-28.07% WACC including floatation costs and market value weight is 21.54% HW: 1. Bond price $ 850; Pfd price - $ 35, and Stock Price- $12. Based on these market prices and the number of shares shown in #2 above, compute the market value weights 2. Floatation costs. Bond 6%, Pfd stock 9%, and common stock 0%. Compute the cost of bonds and pfd stock similar to #5 above, using the floatation costs. New common stock has a -12. -496, Market risk premium-6% Compute the component costs inclusive of floatation. Using the market value weights from previous, what is the WACC of the firm (similar to #3 above)
