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posting for 3rd time, olease dont give a wrong answer if you dont know it Calculating Weighted Average Cost of Capital and Economic Value Added
posting for 3rd time, olease dont give a wrong answer if you dont know it
Calculating Weighted Average Cost of Capital and Economic Value Added (EVA) Ignacio, Inc., had after-tax operating income last year of $1,196,500. Three sources of financing were used by the company: $2 million of mortg rate on long-term treasuries is 3 percent. Ignacio, Inc., pays a marginal tax rate of 30 percent. Required: 1. Calculate the after-tax cost of each method of financing. Enter your answers as decimal values rounded to three places. For example, Mortgage bonds Unsecured bonds Common stock 2. Calculate the weighted average cost of capital for Ignacio, Inc. Round intermediate calculations to four decimal places. Round your fin: % Calculate the total dollar amount of capital employed for Ignacio, Inc. 3. Calculate economic value added (EVA) for Ignacio, Inc., for last year. If the EVA is negative, enter your answer as a negative amount. Is the company creating or destroying wealth? 4. What if Ignacio, Inc., had common stock which was less risky than other stocks and commanded a risk premium of 5 percent? How would that What is the new EVA? In your calculations, round weighted average percentage cost of capital to four decimal places. If the EVA is nes x ng income last year of $1,196,500. Three sources of financing were used by the company: $2 million of mortgage bonds paying 4 percent interest, $4 million of unsecu ercent. Ignacio, inci, pays a marginal tax rate of 30 percent. each method of financing. Enter your answers as decimal values rounded to three places. For example, 4.36% would be entered as ".044". ge cost of capital for Ignacio, Inc. Round intermediate calculations to four decimal places. Round your final answer to four decimal places before converting t. of capital employed for Ignacio, Inc, ded (EVA) for Ignacio, Inc., for last yean. If the EVA is negative, enter your answer as a negative amount. troying wealth? common stock which was less risky than other stocks and commanded a risk premium of 5 percent? How would that affect the weighted average cost of capital? r calculations, round weighted average percentage cost of capital to four decimal places. If the EVA is negative, enter your answer as a negative amount. ing 4 percent interest, $4 million of unsecured bonds paying 6 percent interest, and $9 miltien in common stock, which was considered to be relatively risky (with a risk premium of 8 percent). Std be entered as ".044", to four decimal places before converting to a percentage. For example, .06349 would be rounded to .0635 and entered as "6.35" percent. the weighted average cost of captal? Ve, enter your answer as a negative amount Step by Step Solution
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