Q1. A company has the following information:

• A target capital structure of 40% debt and 60% equity.

• $1,000 par value bonds pay 10% coupon (semi-annual payments), mature in 20 years, and sell for $849.54.

• The company stock beta is 1.2.

• Risk-free rate is 10%, and market risk premium is 5%.

• The company's marginal tax rate is 40%.

The weighted average cost of capital (WACC) is closest to:

A)   13.0%.

B)   13.5%.

C)   12.5%.

Q2. A company is planning a $50 million expansion. The expansion is to be financed by selling $20 million in new debt and $30 million in new common stock. The before-tax required return on debt is 9% and the required return for equity is 14%. If the company is in the 40% tax bracket, the marginal weighted average cost of capital is closest to:

A)   9.0%.

B)   10.0%

C)   10.6%.

Q3. A firm is planning a $25 million expansion project. The project will be financed with $10 million in debt and $15 million in equity stock (equal to the company's current capital structure). The before-tax required return on debt is 10% and 15% for equity. If the company is in the 35% tax bracket, what cost of capital should the firm use to determine the project's net present value (NPV)?

A)   12.5%.

B)   9.6%.

C)   11.6%.

Q4. A firm has $100 in equity and $300 in debt. The firm recently issued bonds at the market required rate of 9%. The firm's beta is 1.125, the risk-free rate is 6%, and the expected return in the market is 14%. Assume the firm is at their optimal capital structure and the firm's tax rate is 40%. What is the firm's weighted average cost of capital (WACC)?

A)   8.6%.

B)   5.4%.

C)   7.8%.

Q5. Hatch Corporation's target capital structure is 40% debt, 50% common stock, and 10% preferred stock. Information regarding the company's cost of capital can be summarized as follows:

• The company's bonds have a nominal yield to maturity of 7%.

• The company's preferred stock sells for $40 a share and pays an annual dividend of $4 a share.

• The company's common stock sells for $25 a share and is expected to pay a dividend of $2 a share at the end of the year (i.e., D₁ = $2.00). The dividend is expected to grow at a constant rate of 7% a year.

• The company has no retained earnings.

• The company's tax rate is 40%.

What is the company's weighted average cost of capital (WACC)?

A)   10.59%.

B)   10.18%.

C)   10.03%.

答案和详解如下：

Q1. A company has the following information:

• A target capital structure of 40% debt and 60% equity.

• $1,000 par value bonds pay 10% coupon (semi-annual payments), mature in 20 years, and sell for $849.54.

• The company stock beta is 1.2.

• Risk-free rate is 10%, and market risk premium is 5%.

• The company's marginal tax rate is 40%.

The weighted average cost of capital (WACC) is closest to:

A)   13.0%.

B)   13.5%.

C)   12.5%.

Correct answer is C)

K_s = 0.10 + (0.05)(1.2) = 0.16 or 16%

K_d = Solve for i: N = 40, PMT = 50, FV = 1,000, PV = -849.54, CPT I = 6 × 2 = 12%

WACC = (0.4)(12)(1 - 0.4) + (0.6)(16)= 2.88 + 9.6 = 12.48

Q2. A company is planning a $50 million expansion. The expansion is to be financed by selling $20 million in new debt and $30 million in new common stock. The before-tax required return on debt is 9% and the required return for equity is 14%. If the company is in the 40% tax bracket, the marginal weighted average cost of capital is closest to:

A)   9.0%.

B)   10.0%

C)   10.6%.

Correct answer is C)

(0.4)(9%)(1 - 0.4) + (0.6)(14%) = 10.56%

Q3. A firm is planning a $25 million expansion project. The project will be financed with $10 million in debt and $15 million in equity stock (equal to the company's current capital structure). The before-tax required return on debt is 10% and 15% for equity. If the company is in the 35% tax bracket, what cost of capital should the firm use to determine the project's net present value (NPV)?

A)   12.5%.

B)   9.6%.

C)   11.6%.

Correct answer is C)

WACC = (E / V)(R_E) + (D / V)(R_D)(1 − TC)

WACC = (15 / 25)(0.15) + (10 / 25)(0.10)(1 − 0.35) = 0.09 + 0.026 = 0.116 or 11.6%

Q4. A firm has $100 in equity and $300 in debt. The firm recently issued bonds at the market required rate of 9%. The firm's beta is 1.125, the risk-free rate is 6%, and the expected return in the market is 14%. Assume the firm is at their optimal capital structure and the firm's tax rate is 40%. What is the firm's weighted average cost of capital (WACC)?

A)   8.6%.

B)   5.4%.

C)   7.8%.

Correct answer is C)

CAPM = R_E = R_F + B(R_M − R_F) = 0.06 + (1.125)(0.14 − 0.06) = 0.15

WACC = (E ÷ V)(R_E) + (D ÷ V)(R_D)(1 − t)

V = 100 + 300 = 400

WACC = (1 ÷ 4)(0.15) + (3 ÷ 4)(0.09)(1 − 0.4) = 0.078

Q5. Hatch Corporation's target capital structure is 40% debt, 50% common stock, and 10% preferred stock. Information regarding the company's cost of capital can be summarized as follows:

• The company's bonds have a nominal yield to maturity of 7%.

• The company's preferred stock sells for $40 a share and pays an annual dividend of $4 a share.

• The company's common stock sells for $25 a share and is expected to pay a dividend of $2 a share at the end of the year (i.e., D₁ = $2.00). The dividend is expected to grow at a constant rate of 7% a year.

• The company has no retained earnings.

• The company's tax rate is 40%.

What is the company's weighted average cost of capital (WACC)?

A)   10.59%.

B)   10.18%.

C)   10.03%.

Correct answer is B)

WACC = (w_d)(k_d)(1 − t) + (w_ps)(k_ps) + (w_ce)(k_ce)

where:
w_d = 0.40
w_ce = 0.50
w_ps = 0.10
k_d = 0.07

k_ps = D_ps / P = 4.00 / 40.00 = 0.10

k_ce = D₁ / P₀ + g = 2.00 / 25.00 + 0.07 = 0.08 + 0.07 = 0.15

WACC = (0.4)(0.07)(1 − 0.4) + (0.1)(0.10) + (0.5)(0.15) = 0.0168 + 0.01 + 0.075 = 0.1018 or 10.18%

thanks

顶

thnx

thanks

thanks

ok