Your Perfect Assignment is Just a Click Away

Starting at $8.00 per Page

100% Original, Plagiarism Free, Customized to your instructions!

glass
pen
clip
papers
heaphones

Corporate Finance

Corporate Finance

Corporate Finance

 

Canyon Drilling, Inc. has just come under new management. One of the first things the new management wants to accomplish is to identify its capital structure and the cost of additional funding, if needed.

According to the accounting department, the current balance sheet is accurate and reflects the financial structure of the company. They have also calculated the marginal tax rate to be 40%. The company’s beta is currently 1.15.

Your Chief Financial Officer, Marge, has also provided you the following information about the market and the company’s financials:

Company Specifics

Debt:

3,600 par value ($1,000) bonds outstanding. All have a 7% coupon, and will mature in 20 years.  Market value is currently $1,050 and interest is paid once a year.

Equity:

Common Stock

The company has 40,000 shares of common stock outstanding, and has a market price of $50 per share.  The stock last paid a dividend of $1.40 and had a constant growth of 5% per year.

Preferred Stock

The company has 7,500 shares of 5% preferred stock outstanding. All have $100 par value and are selling for $80 per share.

Floatation costs:  Debt = 4%, Equity = 5%

Market Specifics

 Market risk premium = 7%     

Risk free rate  = 4%
Return on the average stock = 11%

Tasks:

  • Assuming the same capital structure is to be maintained, what is the optimal capital structure for Canyon Drilling?
  • What is the component cost of capital for the firm?
  • Calculate Canyon Drilling’s after tax weighted average cost of capital, using the information above.

"Place your order now for a similar assignment and have exceptional work written by our team of experts, guaranteeing you A results."

Order Solution Now

Our Service Charter


1. Professional & Expert Writers: Pro Assignments only hires the best. Our writers are specially selected and recruited, after which they undergo further training to perfect their skills for specialization purposes. Moreover, our writers are holders of masters and Ph.D. degrees. They have impressive academic records, besides being native English speakers.

2. Top Quality Papers: Our customers are always guaranteed of papers that exceed their expectations. All our writers have +5 years of experience. This implies that all papers are written by individuals who are experts in their fields. In addition, the quality team reviews all the papers before sending them to the customers.

3. Plagiarism-Free Papers: All papers provided by Pro Assignments are written from scratch. Appropriate referencing and citation of key information are followed. Plagiarism checkers are used by the Quality assurance team and our editors just to double-check that there are no instances of plagiarism.

4. Timely Delivery: Time wasted is equivalent to a failed dedication and commitment. Pro Assignments is known for the timely delivery of any pending customer orders. Customers are well informed of the progress of their papers to ensure they keep track of what the writer is providing before the final draft is sent for grading.

5. Affordable Prices: Our prices are fairly structured to fit in all groups. Any customer willing to place their assignments with us can do so at very affordable prices. In addition, our customers enjoy regular discounts and bonuses.

6. 24/7 Customer Support: At Pro Assignments, we have put in place a team of experts who answer all customer inquiries promptly. The best part is the ever-availability of the team. Customers can make inquiries anytime.