A firm is financed with debt that has a market beta of 0.3 and equity that has a market beta of 1.2.  The risk-free rate is 3%, and the equity premium is 5%.  The overall cost of capital for the firm is 8%.  What is the firmʹs debt-equity ratio? Group of answer choices 28.6%                                                        25.0% 25.2% 74.8%

Q: Where do we generally find optimal level of debt? A. where the tax shield is maximized B. the…

A: The ideal capital design is assessed by computing the blend of obligation and value that limits…

Q: Show your work for the following  A firm's equity beta is 1.2 and its debt is risk free. Given a…

A: Equity beta = 1.2 Debt/equity ratio = 0.7 Asset beta = ?     Asset beta is systematic risk over…

Q: Consider the following data towards a firm's potential leverage. Assume that the firm can lever up…

A: Given:

Q: what is its equity beta?

A: Equity beta also termed as stock beta or levered beta refers to the tool or method used to determine…

Q: The Kanucks Ltd wants to have a weighted average cost of capital of 11 .25%. The firm has an…

A: WACC (Weighted Average Cost of Capital) reflects the blended cost of both debt and equity financing,…

Q: A firm currently has a debt-equity ratio of 0.3. The debt, which is virtually riskless, pays an…

A: Cost of Capital is also known as WACC. It includes the all the cost which is incurred by the company…

Q: . Company cost of capital (S9.2) Nero Violins has the following capital structure: Total Market…

A: Firm's Asset Beta = (Debt Beta x Weight of Debt) + (Preferred stock beta x Weight of preferred…

Q: A firm has 65% probability of being worth $100 million and a 35% probability of being worth $130…

A: The current proportions are the total weights of capitals of source of finance held by the firm.

Q: Evans Technology has the following capital structure. Debt Common equity 30% 70 The aftertax cost of…

A: WACC is the weighted average cost of capital. A company raises its capital from different sources.…

Q: Given the following, determine the firm’s optimal capital structure:   Debt/Assets After-Tax Cost…

A: Part 2: Explanation:Step 1: Calculate the weighted average cost of capital (WACC) using the given…

Q: Nodebt, Inc., is a firm with all-equity financing. Its equity beta is .8. The Treasury bill rate is…

A: WACC means weighted average cost of capital. it includes the cost of equity and cost of debt , cost…

Q: For examples 1 and 2, assume the net cash flow is 2,000,000, the tax rate is 40% and the cost of…

A: The capital structure of a company is comprised of debt and equity. Both these sources of finance…

Q: Based on the table below, Berwyck Industries' credit risk is most likely Total Debt/Total Capital…

A: In all given parameters, higher the cash flow to debt, ROC and EBITDA coverage ratio, lower the…

Q: Your firm has a Return on Assets of 8.00 % , the firm can issue debt at 3.50% regardless of the…

A: According to the MM approach with taxes, as the debt increases, the value of the firm increases due…

Q: Assume a firm can be financed with $5000 of debt that has a market beta of 0.3 and $7000 of equity…

A: Overall cost of capital refers to the average cost that is paid by a company to raise the fund for…

Q: You need to calculate the ABC Corporation's cost of debt, cost of equity, and WACC. Here's what's…

A: The rate at which a company finances all of its capital i.e, debt and equity is known as WACC. This…

Q: If a firm's optimal capital structure is 45 percent debt financing, then the firm may borrow $55 for…

A: In this question, we are required to determine whether the given statement in the question regarding…

Q: Subject: Financial strategy & policy Question No 4…

A: Capital Asset Pricing Model: It is a model that is used to explain the association between…

Q: Debt/Assets Equity/Assets Debt/Equity B-T Cost of RRatio (D/E) Dpebt (ka) RRatio (wa) RRatio (w.)…

A: WACC stands for weighted average cost of capital which shows a combination of different source of…

Q: Assume a firm is financed with $7500 debt and $2500 equity.  The beta of the equity is 1.1.  The…

A: cost of equity = Risk free rate + beta * Market risk premium

Q: 6. The basic WACC equation The calculation of a weighted average cost of capital (WACC) involves…

A: The symbol that represents the cost of preferred stock in the weighted average cost of capital is rp

Q: What is a firm's weighted - average cost of capital if the stock has a beta of 1.45, Treasury bills…

A: CAPM: cost of equity=risk free rate+beta*market risk premiumcalculation of cost of debt after…

Q: Suppose that AXA currently has no debt and has an equity cost of capital of 12%. AXA is considering…

A: Leveraged equity carries the same risk as debt; that is, the company must service the debt to…

Q: The firm gets one-half of its capital from stock, and the other half from bonds. The debtholder’s…

A: The weighted average cost of capital is the average cost of capital of a firm which is calculated…

Q: A firm is trying to determine the cost of equity for its financial structure. The company's equity…

A: The Security Market Line (SML) is a graphical representation of the Capital Asset Pricing Model…

Q: Steeler Inc.'s CFO hired you as a consultant to help her estimate the cost of capital.  You have…

A: Cost of equity can be estimated using capital asset pricing model (CAPM) . The formula for…

Q: Fast Exports Inc. has a beta of 1.2, market risk-premium is 7%, and Treasury bonds are currently…

A: Here,Beta is 1.2Market Risk Premium is 7%Treasury Bond (Risk Free Rate) is 5%

Q: A firm has a profit margin of 35.92, return on assets of 25.86 and a debt to equity ratio of 1.489.…

A: The  calculation of return on equity ,Return of equity is the measure of company annual return as it…

Q: has a debt/equity ratio = 2. The firm has a cost of equity of 12% and a cost of debt of 6%.…

A: Given information : Debt/ Equity ratio = 2 Cost of equity = 12% Cost of debt = 6% Target Debt/…

Q: Find the firm’s Cost of equity, given only the following information about the firm: the firm’s cost…

A: The cost which the firm has to bear for having equity funds in their capital structure is called…

Q: The cost of raising capital through retained earnings is  (GREATER THAN / LESS THAN)  the cost of…

A: The question is based on the concept for calculation of the cost of different components of capital.…

Q: Assume a firm is financed with $1000 debt that has a market beta of 0.4 and $3000 equity.  The risk…

A: The expected return on debt is the effective market rate of interest at the time of the issue of the…

Q: Case 2: The risk-free rate is 1.20%, return on market is 13.00%, and corporate tax rate is 20%.…

A: Answer:To determine the optimal debt ratio for Baltic & Friends Corporation, we need to…

Q: 3. Company WACC is 20%. Debt interest rate is 4% and D/ E ratio is 1,6. What is the cost of equity?…

A: Weighted Average Cost of Capital = WACC = 20% Cost of debt = 4% Debt equity Ratio = 1.6

Q: Which of the following is the better option for an average firm? A. A debt ratio = 30% and a timed…

A: Debt RatioThis ratio indicates the percentage of the company's assets financed by debt. A higher…

Q: Your firm has a Return on Assets of 8.00 %, the firm can issue debt at 3.50% regardless of the…

A: According to the MM approach with taxes, as the debt increases, the value of the firm increases due…

Q: DraftKings Inc (DKNG) has a capital structure of 29% debt and 71% equity. The expected return on the…

A: Weighted average cost of capital is the minimum rate of return required for company and is used for…

Q: Given Analysis of unlevered equity beta with risky debt beta = .30 Firm1 (F1) Firm2 (F2) Firm3 (F3)…

A: Unlevered Beta: Also known as asset beta or equity beta, unlevered beta measures the risk of an…