This paper circulates around the core theme of Insco Inc. has the balance sheet as shown below. Recently the yield on bonds similar to the ones together with its essential aspects. It has been reviewed and purchased by the majority of students thus, this paper is rated 4.8 out of 5 points by the students. In addition to this, the price of this paper commences from £ 99. To get this paper written from the scratch, order this assignment now. 100% confidential, 100% plagiarism-free.
3. Insco Inc. has the balance sheet as shown below. Recently the yield on bonds similar to the ones. 1 answer below » 3. Insco Inc. has the balance sheet as shown below. Recently the yield on bonds similar to the ones that company has had fallen to 4.5%, so that the market value of the bonds is now about $707 million The rate on company’ short-term notes is equal the market’s rate on these notes, which is 5%. What are the company’s total invested capital and capital structure weights? What is the company’s cost of equity according to CAPM, if the U.S. T-bond yield is 2.00 %, the long-term market risk premium is 6% and the company’s levered beta is 1.5? What is the company’s WACC? What would be the beta of View complete question » 3. Insco Inc. has the balance sheet as shown below. Recently the yield on bonds similar to the ones that company has had fallen to 4.5%, so that the market value of the bonds is now about $707 million The rate on company’ short-term notes is equal the market’s rate on these notes, which is 5%. What are the company’s total invested capital and capital structure weights? What is the company’s cost of equity according to CAPM, if the U.S. T-bond yield is 2.00 %, the long-term market risk premium is 6% and the company’s levered beta is 1.5? What is the company’s WACC? What would be the beta of a similar company that has no debt? You will need to estimate beta of bonds and short term debt using CAPM first ” PROBLEM 3 Document Preview: Problem-3
TaxRate
Solution
Given
Solution Legend
= Value given in problem
= Formula/Calculation/Analysis required
= Goal Seek or Solver cell
= Qualitative analysis or Short answer required
PROBLEM 3
Liabilities and Owners’ Capital
Balance Sheet
(Book Values)
Invested Capital
(Market Values)
Current Liabilities
Accounts payable
Notes payable
Other current liabilities`
Total current liabilities
Total liabilities
Owners’ Capital
Common stock ($1 par value per share)
Paid-in-capital
Accumulated earnings
= Crystal Ball Input
Total owners’ capital
= Crystal Ball Output
Total liabilities and owners’ capital
US Treasury Bond Yield
Estimated Market or Equity Risk Premium
Current Share Price
Market value of owners’ equity
Current yield on the firm’s long-term debt
Current yield on the firm’s short-term notes
Dollar value of short term notes outstanding
Corporate tax rate
Enterprise value = Market capitalization + Debt
Notes payable / Enterprise Value
Long-Term Debt / Enterprise Value
Equity / Enterprise Value
After-Tax Cost of Sources of Capital
Notes Payable (after-taxes)
Long-term Debt (after-taxes)
Equity (using the CAPM)
Source of Capital
Capital Structure Weight (Proportion)
After-Tax Cost
Weighted After-Tax Cost
Notes Payable
Long-term Debt
Equity
WACC
December 31, 2010
Long-term debt (6.5% interest paid semianually, due in 2015)
a. What are company’s capital structure weights?
b. What is company’s cost of equity capital using the CAPM?
c. What is company’s WACC?
d) What would be the beta of a similar company that has no debt?
Implied beta of bonds
Implied beta of short term debt
Unlevered beta
Levered equity beta… Attachments: Q..docx Q.-Attachment….xls View less » Sep 18 2015 10:51 AM
