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FIN 370 Week 4, My Finance Lab

FIN 370 Week 4, My Finance Lab

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Published by CharlesDickens2
FIN 370 Week 4, My Finance Lab
FIN 370 Week 4, My Finance Lab

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Published by: CharlesDickens2 on Aug 19, 2014
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10/06/2014

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FIN 370 Week 4, My Finance Lab
1.
 The target capital structure for Jowers Manufacturing is 50 percent common stock, 15 percent  preferred stock, and 35 percent debt. If the cost of euit! for the firm is "0 percent, the cost of preferred stock is 1" percent, and the before#ta$ cost of debt is 10 percent, what is Jower%s cost of capital& The firm%s marginal ta$ rate is 3' percent.
.
 ()eighted a*erage cost of capital+ The target capital structure for M Industries is '0 percent common stock, 10 percent preferred stock, and 50 percent debt. If the cost of euit! for the firm is 1- percent, the cost of preferred stock is 10 percent, the  before#ta$ cost of debt is - percent, and the firms ta$ rate is 35 percent, what is Ms weighted a*erage cost of capital&
3.
 /r!pton electronics has a capital structure consisting of '1 common stock and 5 debt, a debt issue of 1000 par *alue, 2.' bonds that matures in 15 !ears and pa!s an annual interest well sell for 43. /ommon stock of the firm is selling for 30.' per share and the firm e$pects to pa!a "."' di*idend ne$t !ear. i*idends ha*e grown at the rate of 5.3 per !ear and e$pected to continue to do so for the foreseeable future. )hat is /r!ptons cost of capital where the firms ta$ rate is 30
4.
 6s a member of the finance department of ranch manufacturing, !our super*isor has asked !ou to compute the appropriate discount rate to use when e*aluating the purchase of new  packaging euipment for the plant under the assumption that the firms present capital structure reflects the appropriate mi$ of capital source for the firms, !ou ha*e determined the market *alueof the firm%s capital structure as follows 7onds ',500,000, preferred stock ",300,000, commonstock  2,"00,000. To finance the purchase ranch manufacturing will sell 10 !ear bonds pa!ing 2.  per !ear 8 a market price of 1,055 .preferred stock pa!ing ".0" di*idend can be sold for "5.34 common stock for ranch manufacturing is currentl! selling for 55.1' per share and the firm paid a 3.04 di*idend last !ear. i*idend are e$pected to continue growing at a rate of '.4 per !ear into the indefinite future , if the firms ta$ rate is 30 what discount rate should !ou use to e*aluate the euipment purchased .9anch manufacturing compan! )6// is ::::::::::::: round 3 decimal places.
!.
 6be ;orrester and three <f his friends from college ha*e interested a group of *enture capitalists in backing their. The proposed operation would consist of a series of retail outlets toistribute and ser*ice a full line of *acuum cleaners and accessories. These stores would7e located in allas, =ouston, and >an 6ntonio. To finance the new *enture two plans=a*e been  proposed?@lan 6 is an all#common#euit! structure in which ".3 million dollars would be raised7! selling -0,000 shares of common stock.@lan 7 would in*ol*e issuing 1.1 million dollars in long#term bonds with an effecti*eInterest rate of 1".1 plus another 1." million would be raised b! selling '0,000 shares<f common stock. The debt funds raise funder @lan 7 ha*e no fi$ed maturit! date, inThat this amount of financial le*erage is considered a permanent part of

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