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(Weighted average cost of capital) As a member of the Finance Department of Ranch Manulacturing your supervisor has asked you to compute the appropriale discount
(Weighted average cost of capital) As a member of the Finance Department of Ranch Manulacturing your supervisor has asked you to compute the appropriale discount rate fo use whicn evaluating the purchase of new packaging equipment for the plant. Under the assumpsion that the firm's present capital structure reflects the appropriate mix of capital sources for the firm, you have dotermined the market value of the firm's capital structure as follows: To firtance the purchase: Ranch Manufacturing will sell 10-year bonds paying interest at a rate of 7.5 percent per year (with semilannual payment) at the market price of $1.066 Prefarred stock paying a \$1.92 dividend can be sold for $25.78. Common stock for Ranch Manufacturing is currently selling for $54.13 per share and the firm paid a $3.01 dividend last vear Dividends are expected to continue growing at a rate of 5.2 percent por year into the indefinite future. if the firmis tax rate is 30 percent, what discount rate should you use to evaloate the equipment purchase? a. Calculate componant weights of capital. The weight of debt in the firm's coplat structure is 7. (Round to two decimul places) a the purchase, Ranch Manutacturing will sell 70 -year bonds paying interest at a rate of t.5 percent per year (wi stock paying a $1.92 dividend can be sold for $25.78. Common stock for Ranch Manufacturing is currently sell Dividends are expected to continue growing at a rate of 5.2 percent per year into the indefinite future. If the firm te the Data table
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