Thank you in advance for your help! :)
First drop down menu options
10.25%, 12.06%, 11.46%, 9.65%
Second drop down menu options
11.64%, 11.09%, 12.20%, 10.54%
The WACC is used as the discount rate to evaluate various capital budgeting projects, However, it is importont to realize that the WacC is an appropriate discount rate only for a project of average risk. Analyze the cost of capital situations of the following company cases, and answer the specific questions that finance professionais need to address, Consider the case of Turnbull Co. Turnbull Co, has a target capital structure of 58% debt, 6% preferred stock, and 36% common equity, It has a before-tax cost of debt of 11,1%, and its cost of preferred stock is 12.2%. If Turnbull can raise alf of its equity capital from retained earnings, its cost of common equity will be 14.7%, However, if it is necessary to raise new common equity, it will carry a cost of 16.8%. If its current tax rate is 25%, how much higher will Turnbull's weighted average cost of capital (WACC) be if it has to raise additional common equity capital by issuing new common stock instead of raising the funds through retained earnings? (Note: Reund your intermediate calculations to two decimal places.) 0.91% 0.874 0.76% 0.84% decimal places.) 0.9196 D. 8744 0.76% 0.84% Turnbuli Co. is considering a project that requires an initial investment of $270,000. The firm will raise the $270,000 in capital by issuing 5100,000 of debt at a before-tax cost of 11.1%,$30,000 of preferred stock at a cost of 12.2%, and $140,000 of equity at a cost of 14.776. The firm faces a tax rate of 25%. What will be the waCc for this project? (Note: Round your intermediate calculations to three decimal places.) Consider the case of Kuhn Co. Kuhn Co. Is considering a new project that will require an initial investment of $4 million. It has a target capital structure of 45% debt, 4 N. preferred stock, and 51% common equity. Kuhn has noncallable bonds outstanding that mature in five years with a face value of $1,000, an annual coupon rate of 10%, and a market price of $1,050.76. The yleld on the company's current bonds is a good approximation of the yleld on any new bonds that it issues. The company can sell shares of preferred stock that pay an annual dividend of 58 at a price of $92.25 per thare. Kuhn does not have any retained earnings ava lable to finance this project, so the firm will have to issue new common stock to help fund it. Its common stock is currently selling for $22,35 per share, and it is expected to pay a dividend of $1.36 at the end of next year. Fotation costs will represent 8% of the funds raised by issuing new common stock, The company is projected to grow at a constant rate of 8.7%, and they face a tax rate of 25%. What will be the WACC for this project? (Note: Round your intermediate calculations to two decimal places.)
