What is the interest rate paid by the company on these Accounting Question ? A company has a 40% debt-to-equity ratio. Itsreturn on assets is 9.80% and the return onlevered equity is 13.00%. Assume perfect capitalmarkets and no taxation. What is the interestrate paid by the company?

Assuming no taxes and ideal capital markets, the interest rate (rD) was computed by utilizing the…

Answered: A company has a 40% debt-to-equity…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter7: Analysis Of Financial Statements

Section: Chapter Questions

Problem 6P

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A firm had a debt ratio of 1.20. The pretax cost of debt is 8% and the reqiured return on asset is 13%. What is the cost of equity if you Ignore taxes? A) 18.24% B) 20.14% C)17.67% D) 19.57% E) 19%
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A firm had a debt ratio of 0.85. The pretax cost of debt is 8% and the reqiured return on asset is 15.5%. What is the cost of equity if we factorin the firms tax rate of 24%? A) 19.53 B) 18.92 C) 21.57 D) 20.35 E) 20.96
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Using the Du Pont method, evaluate the effects of the following relationships for the Butters Corporation. a. Butters Corporation has a profit margin of 5 percent and its return on assets (investment) is 22.5 percent. What is its assets turnover? (Round your answer to 2 decimal places.) b. If the Butters Corporation has a debt-to-total-assets ratio of 55.00 percent, what would the firm's return on equity be? (Input your answer as a percent rounded to 2 decimal places.) c. What would happen to return on equity if the debt-to-total-assets ratio decreased to 50.00 percent? (Input your answer as a percent rounded to 2 decimal places.)
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A company has the following information: Earnings before interest and taxes Interest expense $140.00 12.00 40% 10.00 12.00 Tax rate Net change in debt Investment in total capital What is its free cash flow to equity? Do not round intermediate calculations. Round your answer to the nearest cent.

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A company has a 40% debt-to-equity ratio. Its return on assets is 9.80% and the return on levered equity is 13.00%. Assume perfect capital markets and no taxation. What is the interest rate paid by the company?