1. FarCry Industries, a maker of telecommunications equipment, has 6 million sha
ID: 2654221 • Letter: 1
Question
1.
FarCry Industries, a maker of telecommunications equipment, has 6 million shares of common stock outstanding, 4 million shares of preferred stock outstanding, and 45,000 bonds. Suppose the common shares are selling for $28 per share, the preferred shares are selling for $15.00 per share, and the bonds are selling for 99 percent of par.
What weight should you use for debt in the computation of FarCry’s WACC?
2.
FarCry Industries, a maker of telecommunications equipment, has 3 million shares of common stock outstanding, 1 million shares of preferred stock outstanding, and 10,000 bonds. Suppose the common shares sell for $25 per share, the preferred shares sell for $13.50 per share, and the bonds sell for 97 percent of par.
What weight should you use for preferred stock in the computation of FarCry’s WACC?
3.
Suppose that TapDance, Inc.’s, capital structure features 70 percent equity, 30 percent debt, and that its before-tax cost of debt is 9 percent, while its cost of equity is 14 percent. Assume the appropriate weighted average tax rate is 34 percent.
What will be TapDance’s WACC? (Round your answer to 2 decimal places.)
WACC %
Explanation / Answer
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Weight of debt Market Value($) Weights Common Stock 168,000,000 61.64 Preferred Stock 60,000,000 22.01 Debt 44,550,000 16.35 Total 272,550,000Related Questions
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