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XYZ has 200M of debt and 500M of Equity on its balance sheet
The firm's bonds have a coupon rate of 6% (assume annual payments) 20 year maturity $1000 face value These bonds currently are selling for 920 The firm's tax rate is 30% and the flotation costs of issuing bonds are 5% The firm's stock sells for 25 per share, currently pays for 1.80 in dividends Investors expect these dividends to grow at 4% per year forever The flotation cost of issuing shares is 8% The book value of equity is 10 per share The firm plans to raise 20% of its equity needs externally and 80% of it What is the firm's
A Cost of debt
B Cost of internal equity
C Cost of external equity
D Weighted Average Cost of Capital
What else can I help you with?
What does wacc measure?
WACC is a component used in finance to measure the company's cost of capital, usually as a discounting factor and the companies use debt or equity for financing.
How do you calculate WACC?
how to calculate WACC how to calculate WACC how to calculate WACC how to calculate WACC
What is the relationship between stock price and WACC?
The relationship between stock price and the Weighted Average Cost of Capital (WACC) is inversely proportional. A lower WACC indicates that a company can finance its operations at a lower cost, which often leads to higher valuations and, consequently, a higher stock price. Conversely, a higher WACC suggests greater risk and cost of capital, which can depress stock prices as investors demand higher returns for the increased risk. Thus, changes in WACC can significantly impact investor perceptions and stock market performance.
Is a higher weighted average cost of capital (WACC) beneficial for a company's financial performance?
A higher weighted average cost of capital (WACC) is generally not beneficial for a company's financial performance. This is because a higher WACC means that the company has to pay more to finance its operations and investments, which can reduce profitability and hinder growth opportunities. Lowering the WACC can lead to improved financial performance by reducing the cost of capital and increasing the company's overall value.
Why WACC represents an opportunity cost to investors?
Wacc Farmula
What happens to the WACC when the federal reserve tightens credit?
WACC will increase.
The goal of applied science is?
It is to use science for a practical job or to solve a problem.
What impact does WACC have on capital budgeting and structure?
What impact does WACC have on capital budgeting and structure?
What was Kellogg's company WACC for the year 2009?
Kellogg's company Weighted Average Cost of Capital (WACC) for 2009 was approximately 7.6%. This figure reflects the average rate of return that the company is expected to pay its security holders to finance its assets. WACC accounts for the cost of equity and the cost of debt, weighted by their respective proportions in the company's capital structure. For precise figures, it is advisable to refer to financial reports or analyses from that specific year.
What the different between accounting and finance?
Accounting is a phylosophical science that helps to a language by which you can understand any information passed by a business. Finance is an important tool of a busuness that helps to solve any kind of finantial problem faced by the business.
Would NPVs change if the WACC changed?
Yes, NPVs would change if the Weighted Average Cost of Capital (WACC) changed. A higher WACC would result in a lower NPV, while a lower WACC would result in a higher NPV. This is because the discount rate used in calculating NPV is based on the WACC.
Why doesn't everyone calculate WACC the same?
because of WACC nature, there are no same utility, and that's why none make same calculation. so WACC=X2+2X3+5X2=0 ? because of WACC nature, there are no same utility, and that's why none make same calculation. so WACC=X2+2X3+5X2=0 ?
