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F. Naz
F. Naz, B.Com
Category: Multiple Problems
Satisfied Customers: 5319
Experience:  have completed B.Com and CA Finalist
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Looking for an answers for finance questions.
Submitted: 1 year ago.
Category: Multiple Problems
Customer: replied 1 year ago.
Crocker Engine Co. is considering increasing the amount of debt in its capital structure. The treasurer is worried about the ramifications of that action on the firm's cost of funds. The following information may be relevant to your analysis.
The company's capital structure is as follows (figures are in book values);
Short term Bank Debt 6.2 Million
Long-Term Bond 26.0
Preferred Stock 5.6
Common Equity (8.60 million shares) 136.0
Total: 173.8 millionBank debt is costing 8.2%
The bonds have a fixed 11% annual coupon and mature in 14 years. The price of the bonds is $109 (based on $100 par value).
The Preferred stock has a $100 par value, pays an annual dividend of 6% of PAR, and is selling for $63 1/4 per share.
The Common stock is selling for $19 dollars per share
The Company's marginal tax rate is 34%
The beta of the firm's stock, given its current capital structure, is ,09
Treasury bonds are currently yielding 7.1%
The market has historically earned 8.3% more than Treasury bonds.If the company sells 10 million in bonds (at the prevailing market rate), and uses the proceeds to repurchase common stock, what will be Crocker's weighted-average cost of funds? Use Beta (Unlevered)=E/V x Beta (Levered) relationship
Customer: replied 1 year ago.
Sorry to bug you but please let me know if this question made it to a person. Thank you!
Expert:  F. Naz replied 1 year ago.


I will go through it and come back to you soon, thanks.

Expert:  F. Naz replied 1 year ago.

I have sent you the offer, please accept it so the answer may be provided in next 24 hours, thanks.

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