The simplified balance sheet for Rensselaer Felt (in thousands) is as follows:
Cash and marketable securities $3,100 Short-term debt $77,200 Accounts receivable 121,600 Accounts payable 63,600 Inventory 126,600 Current liabilities $140,800 Current assets $251,300 Property, plant, and equipment 306,800 Long-term debt 210,200 Deferred taxes 46,600 Other assets 87,400 Shareholders' equity 247,900 Total $645,500 Total $645,500
The debt has an interest rate of 7.50% (short term) and 9.50% (long term). The expected rate of return on the company's shares is 16.50%. There are 7.62 million shares outstanding, and the shares are trading at $40. The tax rate is 35%. Assume the company issues $50 million in new equity and uses the proceeds to retire long-term debt. Also assume the the company's borrowing rates are unchanged and the short-term debt is permanent.
Calculate the cost of equity after the capital restructuring. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
Cost of equity %
Calculate the WACC after the capital restructuring. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
WACC %
The simplified balance sheet for Rensselaer Felt (in thousands) is as follows:
| Cash and marketable securities | $3,100 | Short-term debt | $77,200 | ||
| Accounts receivable | 121,600 | Accounts payable | 63,600 | ||
| Inventory | 126,600 | Current liabilities | $140,800 | ||
| Current assets | $251,300 | ||||
| Property, plant, and equipment | 306,800 | Long-term debt | 210,200 | ||
| Deferred taxes | 46,600 | ||||
| Other assets | 87,400 | Shareholders' equity | 247,900 | ||
| Total | $645,500 | Total | $645,500 | ||
The debt has an interest rate of 7.50% (short term) and 9.50% (long term). The expected rate of return on the company's shares is 16.50%. There are 7.62 million shares outstanding, and the shares are trading at $40. The tax rate is 35%. Assume the company issues $50 million in new equity and uses the proceeds to retire long-term debt. Also assume the the company's borrowing rates are unchanged and the short-term debt is permanent.
Calculate the cost of equity after the capital restructuring. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
Cost of equity %
Calculate the WACC after the capital restructuring. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
WACC %
Related questions
The simplified balance sheet for Rensselaer Felt (in thousands) is as follows:
| Cash and marketable securities | $3,100 | Short-term debt | $77,200 | ||
| Accounts receivable | 121,600 | Accounts payable | 63,600 | ||
| Inventory | 126,600 | Current liabilities | $140,800 | ||
| Current assets | $251,300 | ||||
| Property, plant, and equipment | 306,800 | Long-term debt | 210,200 | ||
| Deferred taxes | 46,600 | ||||
| Other assets | 87,400 | Shareholders' equity | 247,900 | ||
| Total | $645,500 | Total | $645,500 | ||
The debt has an interest rate of 7.50% (short term) and 9.50% (long term). The expected rate of return on the company's shares is 16.50%. There are 7.62 million shares outstanding, and the shares are trading at $40. The tax rate is 35%. Assume the company issues $50 million in new equity and uses the proceeds to retire long-term debt. Also assume the the company's borrowing rates are unchanged and the short-term debt is permanent.
Calculate the cost of equity after the capital restructuring. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
Cost of equity %
Calculate the WACC after the capital restructuring. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
WACC %
