Question 1: Corporation A has debt with market value of $65,706,947, common equity with a book value of $118,790,835, and preferred stock worth $18,249,696 outstanding. Its common equity trades at $89.52 per share, and the firm has 7,388,652 shares outstanding. What weight for Debt should Corporation A use in its WACC?

PART A:

Corporation A has debt with market value of $105,608,320, common equity with a book value of $147,173,315, and preferred stock worth $41,998,034 outstanding. Its common equity trades at $64.34 per share, and the firm has 5,685,934 shares outstanding. What weight for Common Equity should Corporation A use in its WACC?

Corporation A has debt with market value of $190,257,038, common equity with a book value of $126,905,748, and preferred stock worth $27,289,173 outstanding. Its common equity trades at $85.91 per share, and the firm has 7,792,393 shares outstanding. What weight for Preferred Equity should Corporation A use in its WACC?

Corporation A has the following balance sheet and an equity market-to-book ratio of 3.53. Assuming the market value of debt equals its book value, what weight for Debt should Corporation A use in its WACC?

Assets	Liabilities
10000	Debt	4000
	Equity	6000

Corporation A has the following balance sheet and an equity market-to-book ratio of 2.95. Assuming the market value of debt equals its book value, what weight for Common Equity should Corporation A use in its WACC?

Assets	Liabilities
10000	Debt	4000
	Equity	6000

PART B:

Company A has a $10 million debt issue outstanding, with a 6% coupon rate. The debt has semiannual coupons, the next coupon is due in six months, and the debt matures in five years. It is currently priced at 95% of par value. What is Company's A pretax cost of debt?

Company A has a $10 million debt issue outstanding, with a 8% coupon rate. The debt has semiannual coupons, the next coupon is due in six months, and the debt matures in five years. It is currently priced at 95% of par value. If the company has a 47% tax rate What is Company's A post tax cost of debt?

Companys A stock has a beta of 0.38. If the risk-free rate is 6.25% and the market risk premium is 9.29%, what is an estimate of Companys A cost of equity?

Company A has a stock price of $28. The firm will pay a dividend next year of $0.62, and its dividend is expected to grow at a rate of 5.2% per year thereafter. What is your estimate Company's A cost of equity capital?

Company A has a price of $41 and will issue a dividend of $1.97 next year. It has a beta of 2.73, the risk-free rate is 5.6%, and it estimates the market risk premium to be 6.7%.

Under the Capital Growth Dividend Model (CDGM), at what rate do you need to expect Company's A dividends to grow to get the same equity cost of capital as with using the Capital Asset Pricing Model (CAPM)?

PART C:

Company A has a cost of equity of 14.8%, has an effective cost of debt of 5.8%, and is financed 79% with equity and the remaining with debt. What is this firms WACC?

Company A has a cost of equity of 11.16%, has a yield to maturity of 5.04%, and a cost of preferred stock of 7.59%. The market values of its debt, preferred stock, and equity are $0.25M, $5.81M and $249.11M, respectively. The tax rate for the company 40%. What is this firms WACC?

Company A is considering a project with the following projected free cash flows:

0	1	2	3	4
$-70	$22.8	$40.9	$45.19	$49.33

The company believes that given the level of risk of this project, the WACC method is the appropriate approach to valuing the project. The company's WACC is 14%. What is the Net Present Value for this project?

RiverRocks (whose WACC is 12%) is considering an acquisition of Raft Adventures (whose WACC is 15%). Is 12% the appropriate discount rate for RiverRocks to use to evaluate the acquisition?

Company A primarily sells coffee. It recently introduced a new coffee-flavored liquor. Suppose the firm faces a tax rate of 35% and collects the following information.

	Beta	%Debt
Company A	1.13	71%
A Standard Coffee Liquors Company	0.93	89%

If it plans to finance 89% of the new liquor-focused division with debt and the rest with equity, what WACC should it use for its liquor division? Assume a cost of debt of 5.64%, a risk-free rate of 5.63%, and a risk premium of 7.8%.

PART D:

You have started a company and a venture capitalist has offered to invest. You own 100% of the company with 6,353,315 shares. The VC offers $2,183,024 for 991,337 new shares.

What is the implied price per share?

You have started a company and a venture capitalist has offered to invest. You own 100% of the company with 5,881,683 shares. The VC offers $2,070,710 for 611,660 new shares.

What is the post-money valuation?

You have started a company and a venture capitalist has offered to invest. You own 100% of the company with 6,023,920 shares. The VC offers $1,173,577 for 1,032,438 new shares.

What fraction of the firm will you own after the investment?

Company A is going public using an auction IPO. The firm has received the following bids

Price ($)	Number of Shares
14.00	100,000
13.80	200,000
13.60	500,000
13.40	1,000,000
13.20	1,200,000
13.00	800,000
12.80	400,000

The company wants to sell 1.8 million shares in its IPO, what will be the winning auction offer price?

Your investment bankers price your IPO at $11.42 per share for 10 million shares. If the price at the end of the first day of trading is $17.76 per share,

What was the percentage underpricing?

Copy of

Your investment bankers price your IPO at $11.5 per share for 10 million shares. If the price at the end of the first day of trading is $17.58 per share,

How much money did the firm miss out on due to underpricing?

Company A currently has 12,812,796 shares of stock outstanding at a price of $46 per share. The company would like to raise money and has announced a rights issue. Every existing shareholder will be sent one right per share of stock that he or she owns. The company plans to require 12 rights to purchase one share at a price of $46 per share. How much money will it raise if all rights are exercised?