Posted on

WACC Book weights and market weights Webster Company has compiled the information Answer

WACC Book weights and market weights Webster Company has compiled the information_Answer

WACC Book weights and market weights Webster Company has compiled the information_Answer

WACC Book weights and market weights Webster Company has compiled the information_Answer

WACC Book weights and market weights Webster Company has compiled the information_Answer

WACC-Book weights and market weights Webster Company has compiled the information shown in the following table.
Source of capital Book Value Market Value After-Tax cost
Long-term debt $4,000,000 $3,840,000 6.0%
Preferred Stock 40,000 60,000 13.0
Common stock equity 1,060,000 3,000,000 17.0
Totals $5,100,000 $6,900,000

a. Calculate the weighted average cost of capital using book value weights.
b. Calculate the weighted average cost of capital using market value weights.
c. Compare the answers obtained in parts a and b. Explained the differences.

Finding Operating and free Cash Flows: Consider the balance sheets and selected data from the income statement of Keith Corporation that appear below.
Keith Corporation Balance Sheets
December 31
Assets 2012 2011
Cash $1,500 $1,000
Marketable securities 1,800 1,200
Accounts receivable 2,000 1,800
Inventories 2,900 2,800
Total current assets $8,200 $6,800
Gross Fixed Assets $29,500 $28,100
Less: Accumulated depreciation 14,700 13,100
Net fixed assets $14,800 $15,100
Total Assets $23,000 $21,800
Liabilities and Stockholder’s Equity
Accounts Payable $1,600 $1,500
Notes Payable 2,800 2,200
Accruals 200 300
Total Current Liabilities $4,600 $4,000
Long-term debt 5,000 5,000
Total liabilities $9,600 $9,000
Common stock $10,000 $10,000
Retained Earnings 3,400 2,800
Total stockholder’s equity $13,400 $12,800
Total liabilities and stockholder equity $23,000 $21,800

Keith Corporation Income State Data 2012
Depreciation $1,600
Earnings before interest and taxes (EBIT) 2,700
Interest Expense 367
Net profits after taxes 1,400
Tax rate 40%
a. Calculate the firm’s net operating profit after taxes (NOPAT) for the year ended December 31, 2012.
b. Calculate the firm’s operating cash flow (OCF) for the year ended December 31, 2012.
c. Calculate the firm’s free cash flow (FCF) for the year ended December 31, 2012.
Interpret, compare, and contrast your cash flow estimates in parts b and c.

For getting the instant digital download solution, Please click on the “PURCHASE” link below to get WACC Book weights and market weights Webster Company has compiled the information_Answer

For instant digital download of the above solution or tutorial, please click on the below link and make an instant purchase. You will be guided to the PAYPAL Standard payment page wherein you can pay and you will receive an email immediately with a download link. Please note that in case of technical glitch, the solutions will be emailed to you within 24 hours.

In case you find any problem in getting the download link or downloading the tutorial, please send us an email on mail@edusolutionguide.com

WACC