1 answer

That is the one question, solve all of them please Hankins Corporation has 5.7 million shares of common stock outstandin...

Question:

Hankins Corporation has 5.7 million shares of common stock outstanding, 306,000 shares of 4.3 percent preferred stock outstanWhat is the firms cost of each form of financing? (Do not round intermediate calculations and enter your answers as a percenthat is the one question, solve all of them please

Hankins Corporation has 5.7 million shares of common stock outstanding, 306,000 shares of 4.3 percent preferred stock outstanding, par value of $100, and 165.000 5.3 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $73.20 per share and has a beta of 1.13, the preferred stock currently sells for $104.60 per share, and the bonds have 22 years to maturity and sell for 104 percent of par. The market risk premium is 6.9 percent, T-bills are yielding 3.5 percent, and the firm's tax rate is 23 percent. What is the firm's market value capital structure? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., 1616.) Market value weight of debt Market value weight of preferred stock Market value weight of equity What is the firm's cost of each form of financing? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Aftertax cost of debt Cost of preferred stock
What is the firm's cost of each form of financing? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Aftertax cost of debt Cost of preferred stock Cost of equity No If the firm is evaluating a new investment project that has the same risk as the firm's typical project, what rate should the firm use to discount the project's cash flows? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Weighted average cost of capital

Answers

MV of equity=Price of equity*number of shares outstanding
MV of equity=73.2*5700000
=417240000
MV of Bond=Par value*bonds outstanding*%age of par
MV of Bond=1000*165000*1.04
=171600000
MV of Preferred equity=Price*number of shares outstanding
MV of Preferred equity=104.6*306000
=32007600
MV of firm = MV of Equity + MV of Bond+ MV of Preferred equity
=417240000+171600000+32007600
=620847600
Weight of equity = MV of Equity/MV of firm
Weight of equity = 417240000/620847600
W(E)=0.672
Weight of debt = MV of Bond/MV of firm
Weight of debt = 171600000/620847600
W(D)=0.2764
Weight of preferred equity = MV of preferred equity/MV of firm
Weight of preferred equity = 32007600/620847600
W(PE)=0.0516
Cost of equity
As per CAPM
Cost of equity = risk-free rate + beta * (Market risk premium)
Cost of equity% = 3.5 + 1.13 * (6.9)
Cost of equity% = 11.3
Cost of debt
                  K = Nx2
Bond Price =∑ [(Semi Annual Coupon)/(1 + YTM/2)^k]     +   Par value/(1 + YTM/2)^Nx2
                   k=1
                  K =22x2
1040 =∑ [(5.3*1000/200)/(1 + YTM/200)^k]     +   1000/(1 + YTM/200)^22x2
                   k=1
YTM = 4.9982061648
After tax cost of debt = cost of debt*(1-tax rate)
After tax cost of debt = 4.9982061648*(1-0.23)
= 3.848618746896 = 3.85%
cost of preferred equity
cost of preferred equity = Preferred dividend/price*100
cost of preferred equity = 4.3/(104.6)*100
=4.11
WACC=after tax cost of debt*W(D)+cost of equity*W(E)+Cost of preferred equity*W(PE)
WACC=3.85*0.2764+11.3*0.672+4.11*0.0516
WACC =8.87%
.

Similar Solved Questions

1 answer
How do you graph #x^2+y^2-2x-4y-4=0#?
How do you graph #x^2+y^2-2x-4y-4=0#?...
1 answer
With clear steps please Problem #6 A rigid tank contains initially saturated water mixture at 205...
with clear steps please Problem #6 A rigid tank contains initially saturated water mixture at 205 °C with a quality of 50%. Heat is added until the final temperature is 250 °C. Describe the phase at the final state and draw the process on a T-v diagram....
1 answer
I need this using C++. In this project, you will implement the dynamic programming-based solution to...
I need this using C++. In this project, you will implement the dynamic programming-based solution to find the longest common subsequence (LCS) of two sequences. Your inputs will be the two sequences (as Strings) and the outputs are the longest common subsequence (printed as a String) and the fina...
1 answer
At a particular temperature, K = 7.40 × 102 for the reaction H2 (g) + 12...
At a particular temperature, K = 7.40 × 102 for the reaction H2 (g) + 12 (g) 늑 2H1(g) In an experiment, 3.30 moles of H2, 3.30 moles of I2, and 3.30 moles of HI are introduced into a 1.00-L container Calculate the concentrations of all species when equilibrium is reached Concentration o...
1 answer
On January 1, 2020, Sheridan Company sold 12% bonds having a maturity value of $550,000 for...
On January 1, 2020, Sheridan Company sold 12% bonds having a maturity value of $550,000 for $637,838, which provides the bondholders with a 8% yield. The bonds are dated January 1, 2020, and mature January 1, 2025, with interest payable December 31 of each year. Sheridan Company allocates interest a...
1 answer
On April 1, 8,000 shares of $7 par common stock were issued at $25, and on...
On April 1, 8,000 shares of $7 par common stock were issued at $25, and on April 7, 3,000 shares of $70 par preferred stock were issued at $107. Journalize the entries for April 1 and 7. If an amount box does not require an entry, leave it blank. Apr. 1 Apr. 7...
1 answer
The stock price for a company for the years 2010 through 2016 can be approximated by...
The stock price for a company for the years 2010 through 2016 can be approximated by tx2x-168+210x-1335 (10sx516), wherex -10 corresponds to the year 2010 (a) Find r(x). b) Use the quadratie formula to ind the critical numbers of fx) (c) Find f"(x). Use the second-derivative test to determine in...
1 answer
Please help me ! do you think this is good so far ? Results/Data • Aspirin...
please help me ! do you think this is good so far ? Results/Data • Aspirin synthesis salicylic acid: 2.0 g Acetic anhydride: 2 mL d= 1.082g/mL sodium acetate: 0.4 g • Experimental yield of aspirin: 2.4 g FORMATION OF ESTERS II. PREPARATION OF ACETYL SALICYLIC ACID (ASPIRIN): 1 Complet...
1 answer
M Preparing a Statement of Cash Flows (Direct Method) Rainbow Company's income statement and comparative balance...
m Preparing a Statement of Cash Flows (Direct Method) Rainbow Company's income statement and comparative balance sheets follow. RAINBOW COMPANY Income Statement For Year Ended December 31, 2016 Sales $2,250,000 Dividend Income 45,000 2,295,000 $1,320,000 390,000 117,000 21,000 Total Revenue Cost...
3 answers
Collins Office Supplies is considering a more liberal credit policy to increase sales, but expects that 9 percent of the new accounts will be uncollectible
Collins Office Supplies is considering a more liberal credit policy to increase sales, but expects that 9 percent of the new accounts will be uncollectible. Collection costs are 5 percent of new sales, production and selling costs are 78 percent, and accounts receivable turnover is five times. Assum...
1 answer
American Express is known for high value of new card signups. With such a generous sign...
American Express is known for high value of new card signups. With such a generous sign on bonus, what can American Express do to increase profitability on this product while ensuring they don't increase customer churn/turnover?...
1 answer
(2) jahë From fig (1) Determine (a) the result (component of forces in x-axis (Rx F3...
(2) jahë From fig (1) Determine (a) the result (component of forces in x-axis (Rx F3 = 750 N 30 F2 = 625 N F, = 850 N -163 N. -175 N O 170 N -150 N 160 N (2) jlbä b) The result component of forces) .(in y-axis (Ry -545 N -478 N -485 N 550 N -521 N نقطتان...
1 answer
Interview a leader you admire about his or her personal best leadership experience and complete a...
Interview a leader you admire about his or her personal best leadership experience and complete a write-up of the interview. Please include leader's personality, traits and his/her affect on those around them in the write-up. Note: Please write between 2-4 pages....
1 answer
How do you evaluate #\frac { - 4} { 3} \times ( \frac { 6} { - 5} \times \frac { 8} { 9} ) = [ \frac { 4} { - 3} \times ( \frac { 6} { - 5} ) ] \times \frac { 8} { 9}#?
How do you evaluate #\frac { - 4} { 3} \times ( \frac { 6} { - 5} \times \frac { 8} { 9} ) = [ \frac { 4} { - 3} \times ( \frac { 6} { - 5} ) ] \times \frac { 8} { 9}#?...
1 answer
The Consolidated Mining Company bought the Lowly Coal Mine for $11,600,000 with a residual value of...
The Consolidated Mining Company bought the Lowly Coal Mine for $11,600,000 with a residual value of $1,600,000. The company believes Lowly Mine will yield 200,000 tons of coal over the life ot O00 002e 6am69 26/1 qinenenhs9 ma98 sonoa the mine. THIS year, Lowly hasmiped 75,000 tons of coal, sdheled ...
1 answer
The below interference/diffraction pattern for two slits is observed on a screen that is 1.5 meters from the slits. Here, red light with a wavelength of 700 nm (7.0x10-7 m) that is normally incident...
The below interference/diffraction pattern for two slits is observed on a screen that is 1.5 meters from the slits. Here, red light with a wavelength of 700 nm (7.0x10-7 m) that is normally incident on these slits yields this pattern. 9 mm 4 mm Using the locations of interference maxima (e.g., the m...
1 answer
Question 26 2/4 Your answer is partially correct. Fish Democracies Consider the question (using fish) of...
Question 26 2/4 Your answer is partially correct. Fish Democracies Consider the question (using fish) of whether uncommitted members of a group make it more democratic. It has been argued that individuals with weak preferences are particularly vulnerable to a vocal opinionated minority. However, rec...
1 answer
Please use examples to explain the principle on how to calculate the sample size.
Please use examples to explain the principle on how to calculate the sample size....