A firm has a debt-equity ratio of 1.0. The required return on the firm's assets is 16.1% and the pre-tax cost of debt is 9.1%. What is the firm's cost of equity? a. 15.3% b. 18.2% c. 23.1% d. 21.7%
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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) 20.96What is the cost of equity for a firm where the required return on assets is 15.71%, the cost of debt is 6.92%, and the target debt/equity ratio is 1.19? Ignore taxes. O A) 19.05%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%
- You have the following information on a company on which to base your calculations and discussion: Cost of equity capital (rE) = 18.55% Cost of debt (rD) = 7.85% Expected market premium (rM –rF) = 8.35% Risk-free rate (rF) = 5.95% Inflation = 0% Corporate tax rate (TC) = 35% Current long-term and target debt-equity ratio (D:E) = 2:5 a. What are the equity beta (bE) and debt beta (bD) of the firm described above?[Hint: Assume that the above costs of capital have been generated by an appropriate equilibrium model.] b. What is the weighted-average cost of capital (WACC) for this firm at the current debt-equity ratio? c. What would the company’s cost of equity capital become if you unlevered the capital structure (i.e. reduced gearing until there is no debt)Need answer pleaseA firm wants to create a WACC of 11.4%. The firm's cost of equity is 14.7% and the pre- tax cost of debt is 7.5%. The tax rate is 34%. What does its target debt ratio need to be for the firm to achieve its target WACC of 11.4%? a. 35.35% b. 33.85% c. 53.88% d. 46.12%