work must be completed in excel

work must be completed in excel

ATTACHMENT PREVIEW

Download attachment

9-2.) LL Incorporated’s currently outstanding 11%
coupon
bonds have a yield to maturity of 8%.
LL believes it could issue new
bonds
at par that would provide a similar
yield
to maturity. If its
marginal tax rate is 35%, what is LL’s after-tax cost of debt?
9-5.) Summerdahl Resort’s common stock is currently trading at $36 a share. The stock is
expected to pay a
dividend
of $3.00 a share at the end of the year (D1=$3.00) and the dividend is
expected to grow at a constant rate of 5% a year. What is the cost of common
equity
9-15.) Jan. 1 the total
market value
of the Tysseland Co. was $60 million. During the first year
the company plans to raise & invest $30 million in new projects. The firms present market value
structure is considered to be optimal. Assume that there is no short-term debt:
Debt
30,000,000
Common Equity
30,000,000
Total Capital
60,000,000
New
bonds
will have a 8% coupon rate & they will be sold at par. Common stock is currently
selling at $30 a share. Stockholders’ required rate of return expected constant growth rate of 8%.
(the next expected
dividend
pymt is $1.20, so $1.20/$30 = 4%)
a. to maintain the present capital structure, how much of the new
investment
must be financed by
common equity? the answer is $15,000,000 how do I arrive at this number?
b. Assume there is sufficient cashflow so the co. can maintain its target capital structure w/o
issuing additional shares of equity. what is the WACC?
c. Suppose now that there is not enough internal cash flow and the firm must issue new shares of
stock. Qualitatively speaking, what will happen to the WACC? No numbers are required to
answer this question.

Leave a Comment