The essay must be word-processed using size 12 Times New Roman font and 1.5 or double linespacing. Accuracy in spelling, syntax, citations and referencing (Harvard style)? use of information (including evidence-based research and examples)? application of theories/concepts dealt with in the topic or subject? a minimum of 6 academic journals in addition to other sources asevidence of appropriate research for the paper? ability to present an articulate, coherent and well-presented paper. Clear expression, style, punctuation and use of the Harvard system of referencing are expected. Inadequate or inaccurate re — this is the topic question …. What is employee turnover? Explain the role of human resource managers in managingemployee turnover in organisations. Provide examples where appropriate.
December 14, 2017
Critique of Theories Rooted in Psychoanalysis
December 14, 2017

What components make up the cost of capital, i.e., what factors are found in the WACC calculation?

10-2 Basic Definitions for WACC Calculations

Explain why the term ?(1-T)? is included in the WACC calculation.

10-2-1 Overview of Case: Coleman

A company currently plans a capital structure comprised of preferred stock with a weight of 30% and common stock with a weight of 40%. They also say that to achieve their target tax shield goal they need to have a weight of debt at 70%.

Comment on whether this is feasible and if not, why not?

10-3 Cost of Debt

Calculate the annual after-tax cost (in dollars) of debt given the following information:

The firm has 20,000 bonds issued, each with $1,000 par value. (Recall that the coupon interest paid is equal to the par value times the coupon rate.)
The coupon rate paid on the bonds is 5%. (This is the interest expense on the bonds.)
The corporate tax rate is 35%.

10-4 Cost of Preferred Stock

The cost of preferred stock is determined to be 5%. The price of the preferred stock was $54/share. What was the dividend per share paid out to a holder of this preferred stock?

10-5 Cost of Retained Earnings

What is the cost of keeping a portion of a firm?s earnings as retained earnings rather than paying the earnings out as a dividend?

10-5a CAPM Approach

Calculate the cost of equity financing given the following:

Risk-free rate: 1%
Market risk premium: 7%
Beta: 1.25

10-5b Bond-Yield-Plus-Risk-Premium Approach

The return on a bond is 4% while the return on common is 5%. What is the risk premium?

10-5c DCF Approach

Solve for required return given the following:

The dividend paid at the beginning of the first time period (D0) was $4/share. The dividend grows in perpetuity at 3.5% (growth rate g). The price of the stock (P0) is $39/share.

10-5d Averaging the Alternative Estimates

The average rate of return on a stock was calculated to be 18.4%. The DCF method yielded 21%, while the rd +RP method yielded 14%. What estimate did the CAPM yield?

10-6 Cost of New Common Stock

Can a firm expect capital from issuance of new shares to cost more or less than using retained earnings? Explain your answer.

10-7 Composite WACC

Calculate the WACC (report using x.x% format) given the follow information, assuming a tax rate of 30%:

wd: 20%
rd: 7%

wp: 20%
rp: 8%

wc: 60%
rs: 12%

10-9 Adjusting the Cost of Capital for Risk

What could be assumed about a company?s propensity for risk given a lower-than-industry-average WACC?


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