Rolex, Inc. has equity with a market value of $20 million and debt with a market value of $20 million. Assume the firm has no default risk and can borrow at the risk-free interestrate. The risk-free interest rate is 5 percent per year, and the expected return on the market portfolio is 11 percent. The beta of the company's equity is 1.2. The tax rate is 20%.What is the cost of capital for an otherwise identical all-equity firm?O 7.77%O 9.00%O 10.14%O 8.27%

As per CAPM , Cost of equity = Risk free rate +beta (Market return - Rosk free rate)

Answered: 7.77% 9.00% 10.14% 8.27%

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

See similar textbooks

Similar questions

The most recent financial statements for Live Co. are shown here: Income Statement Sales Costs Taxable $15,000 income 9,000 Current assets Fixed -assets $6,000 Total Taxes (33%) 1,980 Net income $4,020 Balance Sheet $32,345 Debt 22,633 Equity $31,878 23,100 $54,978 Total $54,978 Assets and costs are proportional to sales. Debt and equity are not. The company maintains a constant 30 percent dividend payout ratio. No external equity financing is possible. Required: What is the sustainable growth rate? (Do not round your intermediate calculations.)
Please help with 4a and 4b
Probability of financial Value of debt distress $0 0% $2,500,000 1% $5,000,000 2% $7,500,000 4% $10,000,000 8% $12,500,000 16% $15,000,000 32% $20,000,000 64%
None
119il 12.6KB/s 8:48 VOLTE 60% Q2.pdf 1 The following is the Schedule of balances as on 31.3.1988 extracted from the bo Gavaskar, who caries on business under the name and style of Messrs Gavaskar Visuanin Co., at Bombay: Dr. Cr. Amount Amount Particulars Rs Rs 1,400 S Cash in Handr. •Cash at Bank Cn S Sundry Debtors lor, 2,600 86,000 Stock as on 1.4.1987– 62,000 Furniture & Fixtures 21,400 Office Equipment Buildings 16,000 60,000 Motor Car 20,000 Sundry Creditors Loan from Viswanath 43,000 30,000 Reserve for Bad Debts 3,000 Purchases u Purchase Returgs pr 1,40,000 2,600 Sales- Sales Returns 2,30,000 Salaries 4,200 Rent for Godown Pr 11,000 Interest on loan from Viswanath . 5,500 Rates and taxes 2,700 Discount allowed to Debtors 2,100 Discount received from Creditors 2,400 Freight on Purchases Carriage Outwards Drawings Printing & Stationery Electric Charges 1,600 1,200 2,000 12,000 1,800 2,200 Contd.... 1/2
2020 S Change 9% Change 9.60% 2021 Gross operating revenue 1,870,188,069.00 1,706,358,991.00 163,829,078.00 Cost of operating revenue (1,245,049,430.00) (1,160,747,229.00) (84,302,201.00) 7.26% Gross profit 625,138,639.00 545,611,762.00 79,526,877.00 14.58% Other income 1,994,192.00 (1,994,192.00) -100.00% 625,138,639.00 547,605,954.00 77,532,685.00 14.16% Administrative, selling and distribution expenses: Administrative (427,856,374.00) (395,323,017.00) (32,533,357.00) 8.236 (68,301,238.00) (463,624,255.00) Selling and distribution (60,656,587.00) (488,512,961.00) 7,644,651.00 (24,888,706.00) -11.19% 5.37% Impairment recovered/(loss) on trade receivables Operating profit before finance costs and taxation 1,804,151.00 138,429,829.00 (2,673,129.00) 81,308,570.00 (868,978.00) 32.516 57,121,259.00 70.2556 Finance income - interest 1,333,200.00 1,133,753.00 199,447.00 17.5956 Finance costs (21,262,694.00) (20,270,767.00) (991,927.00) 4.896 Profit before taxation 118,500,335.00…
63 is 10.5% of what number? O 6 O 6.615 O 600 O 661.5
Minar Incorporated reported the following results from last year's operations: $ 5,700,000 3,510,000 2,190,000 1,734,000 Fixed expenses Net operating income $ 456,000 Average operating assets $ 3,000,000 At the beginning of this year, the company has a $900,000 investment opportunity with the following characteristics: Sales Variable expenses Contribution margin Sales Contribution margin ratio Fixed expenses $ 1,530,000 60% of sales $ 810,900 If the company pursues the investment opportunity and otherwise performs the same as last year, the combined margin for the entire company will be closest to:
Rosa Burnett needs $6,000 in three years to make the down payment on a new car. How much must she invest today if she receives 2.5% interest annually, compounded annually? Click the icon to view the present value of $1.00 table. She must invest $ (Round to the nearest cent as needed.)
How much could you save for retirement if you chose to invest the money you spend on Starbucks coffee in one year? Assume you buy one venti cup of caffe latte for $4.15 each weekday for 50 weeks and can invest the total amount in a mutual fund earning 5% compounded annually for 30 years. (Use the Table 12.1 provided.) Note: Round your answer to two decimal places.
105-Principles of Financial Management-8-20202 / My courses / BUSS 105-8-20202 / General / Final exam BUSS 105 section 8 The returns of Al Hag Company is as follows. Year 1=6, Year 2=(-10), Year 3=18, Year4=22. The standard deviation of the company is Select one: t of O a. 13.50 mestion O b. 11.20 O c. 12.44 O d. None of the options O e. 12 Next page ev. - 0- 24-05- 2021 Jump to... You are logged in as Omaimah Said Al-Nuwaira (Log out) BUSS 105-8-20202 O Type here to search
Refer to the following selected financial information from Shakley's Incorporated. Compute the company's profit margin for Year 2 (round to the nearest tenth). Net sales Cost of goods sold Interest expense Net income Total assets Total liabilities Total equity Year 2 $ 478,500 276,300 9,700 46,050 317,100 181,400 135,700 Year 1 $426,250 250,120 10,700 39,900 288,000 167,300 120,700

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS