O = Homework: Homework 11 Spring 2022 Question 8, P14-27 (similar to) Part 1 of 7 HW Score: 0%, 0 of 18 points O Points: 0 of 1 Save (Weighted average cost of capital) As a member of the Finance Department of Ranch Manufacturing, your supervisor has asked you to compute the appropriate discount rate to use when evaluating the purchase of new packaging equipment for the plant. Under the assumption that the firm's present capital structure reflects the appropriate mix of capital sources for the firm, you have determined the market value of the firm's capital structure as follows: To finance the purchase, Ranch Manufacturing will sell 10-year bonds paying interest at a rate of 6.9 percent per year (with semiannual payment) at the market price of $1,046. Preferred stock paying a $1.98 dividend can be sold for $25.05. Common stock for Ranch Manufacturing is currently selling for $55.27 per share and the firm paid a $2.94 dividend last year. Dividends are expected to continue growing at a rate of 5.5 percent per year into the indefinite future. If the firm's tax rate is 30 percent, what discount rate should you use to evaluate the equipment purchase? a. Calculate component weights of capital. The weight of debt in the firm's capital structure is %. (Round to two decimal places.) - X Data table Source of Capital Market Values Bonds $3,900,000 Preferred stock $2,200,000 Common stock $6,500,000 (Click on the icon in order to copy its contents into a spreadsheet.) Print Done = Homework: Homework 11 Spring 2022 Question 9, P14-28 (similar to) Part 1 of 7 HW Score: 0%, 0 of 18 points O Points: 0 of 1 Save (Calculating the weighted average cost of capital) You are working as a consultant to the Lulu Athletic Clothing Company, and you have been asked to compute the appropriate discount rate to use in the evaluation of the purchase of a new warehouse facility. You have determined the market value of the firm's current capital structure (which the firm considers to be its target mix of financing sources) as follows: B To finance the purchase, Lulu will sell 20-year bonds with a $1,000 par value paying 5.5 percent per year (with interest paid semiannually) at the market price of $1,012. Preferred stock paying a $2.55 dividend can be sold for $35.13. Common stock for Lulu is currently selling for $50.07 per share. The firm paid a $3.99 dividend last year and expects dividends to continue growing at a rate of 4.3 percent per year for the indefinite future. The firm's maginal tax rate is 34 percent. What discount rate should you use to evaluate the warehouse project? ... a. Calculate component weights of capital. The weight of debt in the firm's capital structure is %. (Round to two decimal places.) - X Data table Source of Capital Market Values Bonds $350,000 Preferred stock $250,000 Common stock $550,000 (Click on the icon in order to copy its contents into a spreadsheet.) Print Done Help me solve this View an example
