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Category > Accounting Posted 10 May 2017 My Price 7.00

Adjusted WACC.

 

18. Adjusted WACC. Thorpe and Company is currently an all-equity firm. It has three million shares selling for $25 per share. Its beta is 1.1, and the current risk-free rate is 2.1%. The expected return on the market for the coming year is 9.3%. Thorpe will sell corporate bonds for 25,000,000 and retire common stock with the proceeds. The bonds are twenty-year semiannual bonds with a 7.8% coupon rate and $1,000 par value. The bonds are currently selling for $970.53 per bond. When the bonds sell, the company%u2019s beta will increase to 1.5. What was Thorpe and Company%u2019s WACC before the bond sale? What is Thorpe and Company%u2019s adjusted WACC after bond sale if the corporate tax rate is 40%? Hint: The weight of equity before selling the bonds is 100% NOTE: show all work

 

22. Beta of a project. Vespucci is adding a project to the company portfolio and has the following information: the expected market return is 16.5%, the risk-free rate is 3.7%, and the expected return on the new project is 14.6%. What is the project%u2019s beta? NOTE: Show all work

 
 

Answers

Alpha Geek
(8)
Status NEW Posted 10 May 2017 05:05 PM My Price 7.00

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Attachments

file 1494436587-473918_1_636299777854781784_WACC.xlsx preview (53 words )
To-----------tal----------- eq-----------uit-----------y V-----------alu-----------eBo-----------nd -----------Val-----------ueA-----------fte-----------r b-----------ond----------- is-----------sue----------- eq-----------uit-----------y v-----------alu-----------eWe-----------igh-----------t o-----------f E-----------qui-----------ty -----------bef-----------ore----------- Bo-----------nd -----------iss-----------ueW-----------eig-----------ht -----------of -----------equ-----------ity----------- af-----------ter----------- bo-----------nd -----------iss-----------ueW-----------eig-----------ht -----------of -----------deb-----------t C-----------ost----------- of----------- eq-----------uit-----------y b-----------efo-----------re -----------deb-----------t i-----------ssu-----------eCo-----------st -----------of -----------equ-----------ity----------- af-----------ter----------- de-----------bt -----------iss-----------ueC-----------ost----------- of----------- de-----------bt -----------Sem-----------ian-----------nua-----------lly-----------Ann-----------ual-----------ly -----------rat-----------eWA-----------CC -----------bef-----------ore----------- de-----------bt -----------iss-----------ueW-----------acc----------- af-----------ter----------- de-----------bt -----------iss-----------ue(-----------B8*-----------B5)-----------+(B-----------6*B-----------11*-----------(1------------40%-----------))B-----------7*B-----------4RA-----------TE(-----------20*-----------2,7-----------.8%-----------*10-----------00/-----------2,------------970-----------.53-----------,10-----------00,-----------0)2-----------.1%-----------+(9-----------.3%------------2.-----------1%)-----------*1.-----------52.-----------1%+-----------(9.-----------3%------------2.1-----------%)*-----------1.1-----------B2/-----------B1B-----------3/B-----------1B1------------B2-----------3*2-----------500-----------000-----------0An-----------swe-----------r 2-----------2An-----------swe-----------r
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