1. Scotch's beta is 1.8 and its tax rate is 25%. If it is financed with 60% debt, what is its unlevered beta?2. Bourbon Enterprise has an unlevered beta of 0.70. Bourbon is financed with 40% debt and has alevered beta of 1.4. If the risk-free rate is 5.0% and the market risk premium is 6%, how much is theadditional premium that Bourbon's shareholders require to be compensated for financial risk?

Name: 1. Scotch's beta is 1.8 and its tax rate is 25%. If it is financed wi
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Description: 1. Scotch's beta is 1.8 and its tax rate is 25%. If it is financed with 60% debt, what is its unlevered beta?2. Bourbon Enterprise has an unlevered beta of 0.70. Bourbon is financed with 40% debt and has alevered beta of 1.4. If the risk-free rate i

Beta is a measure of systematic risk and it compares the investment with the benchmark to…

Answered: 1. Scotch's beta is 1.8 and its tax…

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1. Scotch's beta is 1.8 and its tax rate is 25%. If it is financed with 60% debt, what is its unlevered beta?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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SETAL has an unlevered cost of equity equal to 11.5% and a tax rate of 16%. In years one, two, and three, the expected interest expenses are $142, $255, and $312, respectively. After Year 3, the interest expenses are forecasted to increase at a constant 4.5% each year. What is the horizon value of the interest tax shield?
4. Binford Tools has an expected perpetual EBITDA equal to $67k. Its tax rate is 35%. Binford has $139k in debt at a cost of 6.85%. The unlevered capital cost is 10.25%. What is Binford's total value assuming interest is tax deductible?
QUESTION 31 Twin Arrows Corp. is considering two mutually exclusive projects. Both require an initial investment of $10,000 at t = 0. Project X has an expected life of 2 years with after-tax cash inflows of $6,000 and $7,800 at the end of Years 1 and 2, respectively. In addition, Project X can be repeated at the end of Year 2 with no changes in its cash flows. Project Y has an expected life of 4 years with after-tax cash inflows of $4,300 at the end of each of the next 4 years. Each project has a WACC of 8%. Using the replacement chain approach, what is the NPV of the most profitable project? O a. $4,242 O b. $4,246 O c. $4,286 O d. $4,325 O e. $4,433
A firm's unlevered beta is 0.5 and tax rate is 30%. If it is with 20% debt. What is the firm's levered beta? 0.9012 1.2533 0.5875 0.6235
8)Glassmakers has the below characteristics. The premerger debt is $5, the premerger equity is $10. The risk free rate is 6%. The premerger beta is 1.36. The tax rate is 40%. The cost of debt premerger is 11%. The expected market rate of return is 10%. What discount rate should you use to discount Glassmakers' free cash flows and interest tax savings? 10.01% 10.06% 11.29% 11.44% 13.49%
Wilde Software Development has a 10% unlevered cost of equity. Wilde forecasts the following interest expenses, which are expected to grow at a constant 4% rate after Year 3. Wilde's tax rate is 25%. Interest expenses Year 1=$70 , Year 2= $85, Year 3= $125. What is the horizon value of the interest tax shield? PLEASE Do not round intermediate calculations And please round the answer to the nearest cent. Please show me the steps I don't know what I'm doing wrong!
12 d out of Your firm has expected profit before interest and taxes of R1 600. Your unlevered cost of capital is 13 per cent and your tax rate is 34 per cent. You have debt with both a book and a face value of R2 500. This debt has an 8 per cent coupon and pays interest annually. What is your weighted average cost of capital?
The total in rate sensitive assets for a financial institution is $120 million and the total in rate sensitive liabilities is $95 million. What is the cumulative pricing gap (CGAP) and what is the interest rate sensitivity gap ratio if total assets equals $195 million? What would the projected change to net income be if interest rates rose by 2% on both assets and liabilities? What would the projected change to net income be if interest rates declined by 2% on both assets and liabilities? What would the projected change to net income be if interest rates rose by 1.8% on assets and 1.5% on liabilities? What would the projected change to net income be if interest rates declined by 1.8% on assets and 1.5% on liabilities?
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Tele LLC has a beta of 1.4 and is trying to calculate its cost of equity capital. If the risk - free rate of return is 9 percent and the average market return 14 percent, then what is the firm's after - tax cost of equity capital if the firrn's marginal tax rate is 30 percent? Select one: a. 22% b. 12% c. 16%. D. None of these
Corcovado Pharmaceuticals. Corcovado Pharmaceutical’s cost of debt is 7%. The risk-free rate of interest is 3%. The expected return on the market portfolio is 8%. After effective taxes, Corcovado’s effective tax rate is 25%. Its optimal capital structure is 60% debt and 40% equity. If Corcovado’s beta is estimated at 1.1, what is its weighted average cost of capital? If Corcovado’s beta is estimated at 0.8, significantly lower because of the continuing profit prospects in the global pharma sector, what is its weighted average cost of capital?
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