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MV corporation has debt with market value of $200 million, common equity with a book value of $200 million and prefeered stock worth $40 million.
MV corporation has debt with market value of $200 million, common equity with a book value of $200 million and prefeered stock worth $40 million. If its common stock trades at $70 per share and the corportation has 8 million shares outstanding, what weights should MV use in its WACC? | |||
WACC = Kd(1-T)Wd + KpWp +KeWe | |||
1 | What is the Market Cap? | $560,000,000.00 | |
a | Market Value of debt = | ||
b | Market Value of Preferred stock = | ||
c | Market Value of Common Equity = | ||
Total market Value = | |||
Find out followings | |||
a | Wd= weight in Debt | ||
b | Wp = weioght in Preferred | ||
c | We= weight in Common Equity | ||
Quick check: The Ws should all add up to 1.00 or 100% | |||
2 | Is this company Levered? | ||
3 | Are they utilizing financial leverage in their capital structure? |
WACC = Kd(1-T)Wd + KpWp +KeWe | |||
Portland PetCo has debt with a yield to maturity of 8%, a cost of equity of 14% and a cost of preferred stock of 10%. The market value of its debt, prefered stock, and equity are $11 million, $4 million, and $13 million, respectively, and its tax rate is 40%. What is this firm's after -tax WACC? | |||
Total Value = $28 Million |
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