Test Essay

2530 Words Jan 26th, 2013 11 Pages
Taunton Construction Inc.'s capital situation is described as follows:
Debt: The firm issued 10,000 25-year bonds10 years ago at their par value of \$1,000. The bonds carry a coupon rate of 14% and are now selling to yield 10%.
Preferred Stock: 30,000 shares of preferred stock were sold six years ago at a par value of \$50. The shares pay a dividend of \$6 per year. Similar preferred issues are now yielding 9%.
Equity: Taunton was initially financed by selling 2 million shares of common stock at \$12. Accumulated retained earnings are now \$5 million. The stock is currently selling at \$13.25.
Taunton's Target Capital Structure is as follows:

Debt 30.0%
Preferred Stock 5.0%
Common Equity 65.0% 100.0%
Is the book structure very far off? b. Calculate the cost of debt based on the market return on the company's existing bonds. c. Calculate the cost of preferred stock based on the market return on the company's existing preferred stock. d. Calculate the cost of retained earnings using three approaches, CAPM, dividend growth, and risk premium. Reconcile the results into a single estimate. e. Estimate the cost of equity raised through the sale of new stock using the dividend growth approach. f. Calculate the WACC using equity from retained earnings based on your component cost estimates and the target capital structure. g. Where is the first breakpoint in the MCC (the point where retained earnings runs out)? Calculate to the nearest \$.1M. h. Calculate the WACC after the first breakpoint. i. Where is the second breakpoint in the MCC (the point at which the cost of debt increases.) Why does this second break exist? Calculate to the nearest \$.1M. j. Calculate the WACC after the second break. k. Plot Taunton's MCC. l. Plot Taunton's IOS on the same axes as the MCC. Which projects should be accepted and which should be rejected? Do any of those rejected have IRRs above the initial WACC? If so, explain in words why they're being rejected. m. What is the WACC for the planning period? n. Suppose project E is self-funding in that it comes with a source of its own debt financing. A loan is offered through an

Related Documents

• Essay Psychometric Test

in terms of interviews and tests in conducting the selection of the employees.. Many of us already know that the psychometric tests are commonly used in almost every organization not only in the selection process but also in the process of performance management of the employees. The reason for carrying out the test in the same in the two situations it is to measure the ability and the performance of the employees. In this paper I will discuss what is a psychometric test? How the companies use it…

Words: 2719 - Pages: 11
• Test Essay

te te test test test test test test test test test test test test test test test test test test s test test t test te test test test test test test test test test test test test test test test test test test s test test t test te test test test test test test test test test test test test test test test test test test s test test t test te test test test test test test test test test test test test test test test test test test s test test t test te test test test test test test test test test test…

Words: 4427 - Pages: 18
• Essay Standardized Tests Should Be Mandatory Tests

standardized tests. Every student must take the tests: unless, their parents refuse to have their children take the test. The test might be a state test, such as the regents in New York State, or a test like the SATs and ACTs that most high school students take. Most kids get nervous for these tests. The student might not be good at a subject and not like the test. Others might just be terrible at test taking. Teachers must take time out of teaching to prepare the students for the tests for the state…

Words: 2312 - Pages: 10
• Essay Test

traditional techniques that rely on heavyweight governance. Agile is all about empowering the team and getting closer to what the customer wants. In place of rigorous upfront planning and the phase-based process, it offers a dynamic, iterative build-and-test cycle, where change is handled well. One of Agile’s hallmark features is that it drives the decision-making process lower in an organization, making that organization more responsive and adaptive. Agile may give you the basic orientation, but Scrum…

Words: 19018 - Pages: 77
• Test Essay

Over 5 HDZ50 500(69 µm) - Remarks: Rolled steel excluding tubes, Steel products, Casting and forging to be served under severe corrosion environmental conditions minimum coating mass = 550 g/m 2 (76 µm) = HDZ55 3.3 Number of times, Copper sulfate test by steel Category steel Thickness Rang Steel Category Rolled steels excluding tubes Steel products, Steel tubular products Casting and forgings Bolts & Nuts 12 mm and over in dia. Wasgers iver 2.3 mm in thick. Thickness of steel Up to 5 mm 4 times…

Words: 652 - Pages: 3
• Essay Personality Tests And Eysenck Test

learned that I needed to take two personality tests for the course. As I continued reading throughout our personality book, I became captivated on so many levels about personality psychology. I was scared at first to take these tests, then I thought to that these results would be beneficial in knowing and confirming my thoughts of myself. The two personality tests I took were the Five Factory Personality test and the Eysenck test. The five factor personality test gave me on Factor 1 extraversion, a score…

Words: 758 - Pages: 4
• Essay Personality Test And Personality Tests

their personality. Based on that belief, the personality test has been designed as a hiring tool and most personality tests are presented as questionnaires that applicants are required to fill out during hiring processes. Data shows that personality test has become an industry with \$400 million a year and at least 30 percent of organizations in U.S. have used that in hiring practices (Berry et al. 13). Managers are convinced that personality test enables them to select the applicants who are more likely…

Words: 1028 - Pages:
• Essay Personality Tests : A Personality Test

complete a personality test. Your friend has enough knowledge of personality tests and the job description to know that her personality profile is not exactly what the company is looking for. However, she would really like the job and believes she would make a great employee. She is planning to answer the questions on the personality test to match the company profile and has come to you for advice. Based on this scenario, answer the questions below. Do you believe personality tests are an appropriate…

Words: 1532 - Pages: 7
• Biology: Chemical Tests and Test Essay

Laboratory Report Title: Identifying the four major classes of macromolecules through various tests. Group Members: Antonia Johnson, Payton Ewing, Lenneisha Hepburn, Kendisha Hanna, Introduction: Macromolecules also known as biological molecules are monomers which are the simple units of polymers. All macromolecules contain carbon and hydrogen which are found in organic compounds. In this Experiment we will test for the presence of protein, starch, lipids, and sugars by analyzing the content off food…

Words: 2043 - Pages: 9
• Essay Iq Tests And The Iq Test

idea that young adults who score high on the IQ test tend to go on and do better in life. They succeed in a variety of aspects in their life such as: academic achievement, financial success, and even better health. However, the debatable question remains the same; are these people with higher IQs more successful for the reason that they are more intelligent? Before even taking the IQ test I already had an idea of what I believe in. I believe the test doesn’t necessarily measure the intelligence level…

Words: 744 - Pages: 3