Need Help-Capital Budgeting Problem


Need Help-Capital Budgeting Problem

Financial Management

Ford Company

Capital Budgeting Problem

 

The market value of Fords’ equity, preferred stock and debt are $7 billion, $3 billion, and $10 billion, respectively. Ford has a beta of 1.8, the market risk premium is 7%, and the risk-free rate of interest is 4%. Ford’s preferred stock pays a dividend of $3.5 each year and trades at a price of $27 per share. Ford’s debt trades with a yield to maturity of 9.5%. What is Ford’s weighted average cost of capital if its tax rate is 30%?

 

Ford Company
 
Market Capitalization Weight
Equity (E)
Preferred (P)
Debt (D)
Total

 

 

 

Ford Company
Weight Cost After-tax

Marginal Weight

Equity (E) X =
Preferred (P) X =
Debt (D) X =
Total X =

 

Need Help-Capital Budgeting Problem

 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: