A company has a target debt-to-equity ratio 2/3. The firm has no preferred stock. The firm's bonds have a coupon rate of 9% and YMT of 8.5%, and the firm is subject to a 30% corporate tax rate. The firm has common stock with a beta of 1.41. The risk free rate on treasury bills is 4% and the expected market risk premium is 10%. What is the minimum after-tax rate of return that the company must earn on its investments?

Q: Prokter and Gramble​ (PKGR) has historically maintained a​ debt-equity ratio of approximately 0.19.…

A: The intrinsic value of a company can be ascertained through financial analysis using the FCFF (Free…

Q: A firm is financed with a mix of risk-free debt (currently valued at £800,000) and equity (which has…

A: Weighted average cost of capital is the average cost of capital that the firm incur for raising…

Q: You were hired as a consultant to XYZ Company, whose target capital structure is  30% debt, 8%…

A: target capital structure:Proportion of debt = Wd = 30%Proportion of preferred capital = Ws = 8%…

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A: Information Provided: Debt equity ratio = 0.45 Cost of equity = 17.6% Pre tax cost of debt = 13.5%…

Q: A company is 48% financed by risk-free debt. The interest rate is 9%, the expected market risk…

A: Given information: Stock's Beta = 0.58 Market risk premium (MRP) = 7% Risk free interest rate (Rf) =…

Q: Assume that you are on the financial staff of Ezzell Enterprises, and you have collected the…

A: WACC (Weighted Average Cost of Capital) is a measure used to determine the average cost a company…

Q: We Do Bankruptcies is a law firm that specializes in providing advice to firms in financial…

A:

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A: The Weighted Average Cost of Capital (WACC) refers to the financial ratio that provides the overall…

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A: A levered company is a company which has both debt and equity in its capital structure. It involves…

Q: Your firms has outstanding bonds with a 0.09 coupon and 0.10 yield to maturity. Your CFO believes…

A: Coupon rate = 0.09 Yield to maturity = 0.10 Marginal Tax rate= 0.40

Q: Outlet has an unlevered cost of capital of 14.2 percent, a tax rate of 35 percent, and expected…

A: Value of Unlevered Firm = EBIT*(1-tax rate)/unlevered cost of capital  = [23400*(1-35%)]/14.2% =$…

Q: ABC Company is re-evaluating its debt level. Its current capital structure consists of 72% debt and…

A: Risk-free rate (Rf)=0.05 Market risk premium (Rm-Rf)=0.069 Current beta (β)=1.63 Current Capital…

Q: A firm is financed with a mix of risk-free debt (currently valued at £800,000) and equity (which has…

A: Let's start with the understanding the meaning of weighted average cost of capital it is a…

Q: ABC Corp has a market value of debt to equity ratio of 1.50e, market value of debt to market value…

A: Cost of capital can be determined by using the formula of weighted average cost of capital by adding…

Q: The Omega Corporation has some excess cash it would like to invest in marketable securities for a…

A: Formula to calculate after tax yield = Income * (1-tax rate)

Q: What is its WACC after issuing debt? [give your answer in %, with two decimal points precision]

A: First we need to determine the value of the firm with debt and then compute the weight of debt and…

Q: Bermuda Cruises issues only common stocks and coupon bonds. The firm has a debt-equity ratio of…

A: Given debt equity ratio = 0.45 Debt Equity ratio = Debt / Equity = 0.45 It means that If Equity is 1…

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A: The objective of this question is to calculate the Weighted Average Cost of Capital (WACC) for…

Q: Kestrel, Inc. has an equity market capitalization of $6,500,000. Its equity beta is 2.4. The…

A: Value of Equity = e = $6,500,000Beta = b = 2.4Risk free rate = rf = 1.4%Market Return = rm =…

Q: Canon Corporation. has a market value of its debts of $350 millions with 8% cost of debt. Currently,…

A: 1. According to Capital Asset pricing model ,ke = Rf + ( Rm - Rf)where ,ke = cost of equityRf =…

Q: Assume that you are on the financial staff of Davis Enterprises, and you have collected the…

A: As per the Capital Assets Pricing Model(CAPM),>Cost of equity = Risk free rate +[Beta x Market…

Q: Bermuda Cruises issues only common stock and coupon bonds. The firm has a debt-equity ratio of 1.37.…

A: We will use the below formula to calculate the equity ratio.Equity ratio = 1/(1+D)WhereD - Debt to…

Q: Prokter and Gramble (PKGR) has historically maintained a debt-equity ratio of approximately 0.16.…

A: The FCFF (Free Cash Flow to Firm) valuation method is a financial analysis technique used to…

Q: Bermuda Cruises issues only common stock and coupon bonds.  The firm has a debt-equity ratio of…

A: In the given case, there is given cost of equity , pre tax cost of debt and the tax rate . So, from…