Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. easy car corp. is a grocery store located in the s

Easy Car Corp. is a grocery store located in the southwest. It paid an annual dividend...

50.1K

Verified Solution

Question

Finance

Easy Car Corp. is a grocery store located in the southwest. Itpaid an annual dividend of $10.00 last year to its share holdersand plans to increase the dividend annualy at a rate of 4.0%forever. It currently has 600.00 common shares outstanding. Theshares currently sell for $50 each. Easy Car Corp. also has 20,000semi annual bonds outstanding with coupon rate of 8.9141%, amaturity of 26years, and a par value of 1,000. The bonds currentlyhave a YTM of 10%. The corporate tax rate is 25%

Multi parts

a.What is the cost of debt for easy corp as a percent?

b.How many interest payments are left for the bond of EasyCorp?

c.What is the interest payment per period for the bond?

d. What is the discount rate perperiod to use in pricing thebonds?

e.What is me market value of equity for the calculation of theWACC for Easy?

f.Ehat is the cost of equity foe Easy?

g.Waht is the market value of debt to be used in the calculationof the Wacc for easy?

h.What id the valu of D/V?

i.What is the weighted averge cost of capital (WACC) for EasyCorp?

Answer & Explanation Solved by verified expert
4.2 Ratings (826 Votes)
a Cost of debt After tax YTM of bond Cost of debt YTM 1 tax rate Here YTM 10 or 010 Tax rate 25 or 025 Now Cost of debt 010 1 025 Cost of debt 010 075 Cost of debt 00750 or 750 b No Of interest payments No Of compoundings per year No Of years No of interest payments 2 semi annual 26 years No Of interest payments 52 c Interest payment per period ie Semi annual Par value    See Answer
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Transcribed Image Text

Easy Car Corp. is a grocery store located in the southwest. Itpaid an annual dividend of $10.00 last year to its share holdersand plans to increase the dividend annualy at a rate of 4.0%forever. It currently has 600.00 common shares outstanding. Theshares currently sell for $50 each. Easy Car Corp. also has 20,000semi annual bonds outstanding with coupon rate of 8.9141%, amaturity of 26years, and a par value of 1,000. The bonds currentlyhave a YTM of 10%. The corporate tax rate is 25%Multi partsa.What is the cost of debt for easy corp as a percent?b.How many interest payments are left for the bond of EasyCorp?c.What is the interest payment per period for the bond?d. What is the discount rate perperiod to use in pricing thebonds?e.What is me market value of equity for the calculation of theWACC for Easy?f.Ehat is the cost of equity foe Easy?g.Waht is the market value of debt to be used in the calculationof the Wacc for easy?h.What id the valu of D/V?i.What is the weighted averge cost of capital (WACC) for EasyCorp?

Other questions asked by students