Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Q 3, parts A-E please 3. Lo-Tek Industries, the nation's largest manufacturer of hammers, has published the following information as of April 30, 2021: a.

Q 3, parts A-E please image text in transcribed
3. Lo-Tek Industries, the nation's largest manufacturer of hammers, has published the following information as of April 30, 2021: a. Loan: Lo-Tek states that it currently has a newly issued $18 million bank loan with a rate of 9.0%. b. Bond: In addition, the firm has an 11.0% coupon bond issue with a face value of $30 million that matures in 8 years and has a yield to maturity of 7.0% c. Preferred Stock: The firm's preferred stock sells for $50 per share and pays an annual dividend of $5.50 per share. There are 2.0 million shares outstanding. d. Common Equity: The company's common stock sells for $60 per share and is expected to pay a dividend of $3.00 per share by the end of this year (i.e. Div =$3.00). The dividend is expected to grow at a constant rate of 7% a year. The yield on risk-free Treasury Bills is 3.3% while the market (S&P500) return is believed to be 12.9%. LO-Tek is a defensive stock with a Beta of 0.906. There are 12 million shares outstanding e. The company's tax rate is 21% Compute the weights and cost of capital for each component and the Weighted Average Cost of Capital (WACC). Show all work

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Legal Environment Today Summarized Case Edition

Authors: Roger LeRoy Miller

8th Edition

130526276X, 978-1305279407, 1305279409, 978-1305704930, 1305704932, 978-1305262768

More Books

Students also viewed these Finance questions

Question

What options or strategies should Don use with Frank?

Answered: 1 week ago