Maurice Tutor

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About Maurice Tutor

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Algebra,Applied Sciences,Biology,Calculus,Chemistry,Economics,English,Essay writing,Geography,Geology,Health & Medical,Physics,Science Hide all
Teaching Since: May 2017
Last Sign in: 401 Weeks Ago, 2 Days Ago
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Education

  • MCS,PHD
    Argosy University/ Phoniex University/
    Nov-2005 - Oct-2011

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  • Professor
    Phoniex University
    Oct-2001 - Nov-2016

Category > Accounting Posted 21 Aug 2017 My Price 9.00

Imaginary Products Co.

13.25 WACC for a firm: The Imaginary Products Co. currently has $300 million of market value debt outstanding. The 9 percent coupon bonds (semiannual pay) have a maturity of 15 years and are currently priced at $1,440.03 per bond. The firm also has an issue of 2 million preferred shares outstanding with a market price of $12.00. The preferred shares offer an annual dividend of $1.20. Imaginary also has 14 million shares of common stock outstanding with a price of $20.00 per share. The firm is expected to pay a $2.20 common dividend one year from today, and that dividend is expected to increase by 5 percent per year forever. If Imaginary is subject to a 40 percent marginal tax rate, then what is the firm’s weighted average cost of capital? Capital component Number outstanding Current price Bonds 300,000 $1,440.03 Preffered stock 2,000,000 $12.00 Common stock 14,000,000 $20.00 Coupon rate on debt 9% Coupon frequency (per year) 2 Bond maturity (years) 15 Preferred dividend (annual) $1.20 Expected dividend on common (D1) $2.20 Constant annual dividend growth rate (forever) 5% Marginal tax rate 40% Capital component Market Value Weight After-tax cost Weighted Cost (%) Bonds Preferred stock Common stock Total capital (market value) WACC

Answers

Maurice Tutor
(5)
Status NEW Posted 21 Aug 2017 09:08 PM My Price 9.00

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