SASSY, Inc stock has a beta of 1 2, the expected return on the market is 13 5 and the current risk free rate is 5 What is SASSYs cost of equity DOG, Inc has a $20 million, 8 25 , 10 year year bond issue selling at 97 The bond pays annual interest What would be the before tax component cost of debt for DOG Assuming they are in the 21 tax bracket and have unconstrained ability to take advantage of the tax benefits of debt, calculate their after tax cost of debt SHED A LOT, Inc has two million shares of common stock outstanding selling at $27 per share They also have one million shares of preferred stock outstanding and 10,000 bonds Preferred shares are selling for $14 50 per share and the bonds are selling at 98 Calculate the weight you should use for the equity in the computation of SHED A LOTs WACC CATSDROOL, Inc has a target capital structure of 65 equity and 35 debt The firm has a before tax cost of debt of 8 and is in the 21 tax bracket The cost of equity for the firm is 13 Calculate the WACC for CATSDROOL assuming they can take full advantage of the tax benefit of debt GOLDENRETRIEVERSRULE, Inc (GRRR) has 5 million common shares outstanding Each share sells for $24 per share and the GRRR management is expected to set the next annual dividend at $2 25 per share Investors, analysts and stakeholders all expect the future dividends of GRRR to grow indefinitely by 8 per year The stock has a beta of 2 2, the current risk free rate is 5 5 , and the expected return on the market is 11 GRRR also has 1 million shares of 5 preferred stock outstanding, with these shares selling for $44 per share The company has 150,000, 15 year, 9 annual bonds outstanding which are currently selling at 112 00 GRRR is in the 21 tax bracket and expects to be able to take full advantage of any interest tax shields What is the firms WACC HINT Absent guidance concerning which estimate (CAPM or Constant Growth) is more appropriate, the best approach is to calculate both and use the average Please answer questions 1 6 Also, please clearly write out the solutions and steps in financial calculator keystrokes rather than Excel Thank you in advance

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Jul 31, 2024

SASSY, Inc. stock has a beta of 1.2, the expected return on the market is 13.5% and the current risk-free rate is 5%. What is

SASSY, Inc. stock has a beta of 1.2, the expected return on the market is 13.5% and the current risk-free rate is 5%. What is SASSYs cost of equity?
DOG, Inc. has a $20 million, 8.25%, 10 year-year bond issue selling at 97. The bond pays annual interest. What would be the before tax component cost of debt for DOG? Assuming they are in the 21% tax bracket and have unconstrained ability to take advantage of the tax benefits of debt, calculate their after-tax cost of debt.
SHED-A-LOT, Inc. has two million shares of common stock outstanding selling at $27 per share. They also have one million shares of preferred stock outstanding and 10,000 bonds. Preferred shares are selling for $14.50 per share and the bonds are selling at 98. Calculate the weight you should use for the equity in the computation of SHED-A-LOTs WACC.
CATSDROOL, Inc. has a target capital structure of 65% equity and 35% debt. The firm has a before-tax cost of debt of 8% and is in the 21% tax bracket. The cost of equity for the firm is 13%. Calculate the WACC for CATSDROOL assuming they can take full advantage of the tax benefit of debt.
GOLDENRETRIEVERSRULE, Inc. (GRRR) has 5 million common shares outstanding. Each share sells for $24 per share and the GRRR management is expected to set the next annual dividend at $2.25 per share. Investors, analysts and stakeholders all expect the future dividends of GRRR to grow indefinitely by 8% per year. The stock has a beta of 2.2, the current risk-free rate is 5.5%, and the expected return on the market is 11%. GRRR also has 1 million shares of 5% preferred stock outstanding, with these shares selling for $44 per share. The company has 150,000, 15-year, 9% annual bonds outstanding which are currently selling at 112.00. GRRR is in the 21% tax bracket and expects to be able to take full advantage of any interest tax shields. What is the firms WACC? HINT - Absent guidance concerning which estimate (CAPM or Constant-Growth) is more appropriate, the best approach is to calculate both and use the average!

Please answer questions 1-6. Also, please clearly write out the solutions and steps in financial calculator keystrokes rather than Excel. Thank you in advance!