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(Weighted Average cost of capital) The target capitalstrictu

(Weighted Average cost of capital) The target capitalstrictu

(Weighted Average cost of capital) The target capitalstricture fo QM industries is 41% common stock 10% preferred stock, and 49% ifthe common cost equity for the firm is 18.6% the cost of preferred stock is9.2% but before tax cost is 7.7% and the firms tax rates is 35% what is QM’sweighted average cost of capital.QM’s wacc is : _________% (Round to three decimals)2) (Weighted average cost of the capital) CryptonElectronics has a capital structure consisting of 37% common stock and 63%debt. A debt issue of $1,000 par value, 5.8% bonds that mature in 15 years andpay per annual interest will sell for $971. Common stock of the firm iscurrently selling for 30.65 per share and the firm expected to pay a $2.34dividend next year. Dividends have grown at the rate of 5.2% per year and areexpected to continue to do so for the foreseeable future. what is Crypton’scost of capital where the firm’s tax rate is 30%Crypton’s cost of capital is:________% (Round to threedecimal places).3) (Weighted cost of capital) The target capital structurefor Jowers Manufacturing is 49% common stock, 20% preferred stock, and 31%debt. If the cost of common equity for the firm is 20.4%, the cost of preferredstock is 11.4%, and the before tax cost of debt is 9.2%, What is Jowers cost ofcapital? The firm’s tax rate is 34%Jower’s WACC is:_______% (Round to three decimal places).4) (Weighted average cost of capital) As a member of thefinance department of ranch manufacturing, your supervisor has asked you tocompute the appropriate discount rate to use when evaluating the purchase ofnew packing equipment for the plant. Under the assumption that the firm’spresent capital structure reflects the appropriate mix of capital sources forthe firm, you have determined the market value of the firm’s capital structureas follows. To finance the purchase, Ranch manufacturing will sell 10 yearbonds paying 6.9% per year at the market price of $1,057. Preferred stockpaying a $1.96 dividend can be sold for $25.68. Common stock for ranchmanufacturing is currently selling for $54.82 per share and the firm paid a$3.08 dividend last year. Dividends are expected to continue growing at a rateof 4.6 per year into the indefinite future. If the firm’s tax rate is 30% whatdiscount rate should you use to evaluate the equipment purchase?Ranch Manufacturing’s WACC is:_______% (Round to threedecimal places)5) (Related to checkpoint15.2)(EBIT-EPS analysis) Abe forrester and three of his friends from collegehave interested a group of venture capitalists in backing their business idea.The proposed operation would consist of a series of retail outlets todistribute and service a full line of vaccum cleaners and accessories . Thesestores would be located in Dallas, Houston, and San Antonio. To finance the newventure two plans have been proposed:· Plan A is an all- common- equity structure inwhich $2.5 million dollars would be raised by selling 80,000 shares of commonstock.· Plan B would involve issuing $1.4 milliondollars in long-term bonds with an effective interest rate of 12.1% plus $1.1million would be raised by selling 40,000 shares of common stock. The debtfunds raised under plan B have no fixed maturity date, in that this amount offinancial leverage is considered a permanent part of the firm’s capitalstructure. Abe and his partners plan to use a 34% tax rate in their analysis,and they have hired you on a consulting basis to do the following:   a. Find the EBITindifference level associated with the two financing plans.   b. Prepare a pro formaincome statement for the EBIT level solved for in part a. that   shows EPS will be the same regardlesswhether Plan A or B is chosen. a. Find the EBIT indifference level associated with the two financingplans.   -The EBIT indifference levelassociated with the two financing plans is: $______ (Round to the nearestdollar).6) (EBIT-EPS analysis) Three recent graduates of the computer scienceprogram at the University of Tennessee are forming a company that will writeand distribute new application software for the iPhone. Initially, thecorporation will operate in the southern region of Tennessee, Georgia, NorthCarolina, and South Carolina. A small group of private investors in theAtlanta, Georgia are is interested in financing the startup company and twofinancing the startup company and two financing plans have been put forth forconsideration: · The first (Plan A) is an all-common-equitycapital structure. $2.1 million dollars would be raised by selling common stockat $10 per common share. · Plan B would involve the use of financialleverage. $1.1 million dollars would be raised by selling bonds with aneffective interest rate of 10.8% (per annum), and the remaining $1.0 millionwould be raised by selling common stock at the $10 price per share. The use offinancial leverage is considered to be a permanent part of the firm’scapitalization, so no fixed maturity date is needed for the analysis.a. Find the EBIT indifference level associated with the two financingplans. b. A detailed financial analysis of the firm’s prospects suggests thatthe long-term EBIT will be above $314,000 annually. Taking this intoconsideration, which plan will generate the higher EPS?a. Find the EBIT indifference level associated with the two financingplans.  -The EBIT indifference level associatedwith the two financing plans is: $_____(Round to the nearest dollar.)

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