Aliphatic Solutions has a capital structure with a debt-to-equity ratio of 1.5, a 6% cost of debt, a 12% cost of equity, and a 30% tax rate. What is Aliphatic Solutions' cost of capital?
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- Ilumina Corp is trying to determine its optimal capital structure. The company’s capital structure consists of debt and common stock. In order to estimate the cost of debt, the company has produced the following table: Percent financed with debt (wd) Percent financed with equity (wc) Debt-to-equity ratio (D/S) After-tax cost of debt (%) 0.25 0.75 0.25/0.75 = 0.33 6.9% 0.35 0.65 0.35/0.65 = 0.5385 7.1% 0.50 0.50 0.50/0.50 = 1.00 8.0% The company uses the CAPM to estimate its cost of common equity, rs. The risk-free rate is 5% and the market risk premium is 6%. Ilumina estimates that its beta with 10% debt is 1. The company’s tax rate, T, is 40%. On the basis of this information, what is the company’s optimal capital structure, and what is the firm’s cost of capital at this optimal capital structure? (Please show work)Aaron Athletics is trying to determine its optimal capital structure. The company’s capital structure consists of debt and common equity. In order to estimate the cost of capital at various debt levels the company has constructed the following table: Percent financed with debt (wD) Percent financed with equity (ws) Before tax cost of debt 0.10 0.90 7.0% 0.20 0.80 7.2% 0.30 0.70 8.0% 0.40 0.60 8.8% 0.50 0.50 9.6% The company uses the CAPM to estimate its cost of equity, rS . The risk-free rate is 4% and the market risk premium is 5%. Aaron estimates that if it had no debt its beta would be 1.0. (It’s unlevered beta equals 1.0). The company’s tax rate is 40%. On the basis of this information, what is the company’s optimal capital structure, and what is the WACC at that capital structure? (Show your calculations at each debt level)..Scanlon Inc.'s CFO hired you as a consultant to help her estimate the cost of capital. You have been provided with the following data: rRF = 4.10%; RPM = 5.25%; and b = 0.70. Based on the CAPM approach, what is the cost of equity?
- Tom Manufacturing Corp. desires a weighted average cost of capital of 8%. The firm has an after-tax cost of debt of 5% and a cost of equity of 14%. What debt-equity ratio is needed for the firm to achieve its targeted weighted average cost of capital? A. 0.25 B. 0.50 C. 1.50 D. 2.00 E. 3.00Answer meSeduak has estimated the costs of debt and equity capital for various proportions of debt in its capital structure. % Debt After-tax cost of debt Cost of equity 0% - 13.0% 10 5.4% 13.3 20 5.4 13.8 30 5.8 14.4 40 6.3 15.2 50 7.0 16.0 60 8.2 17.0 Based on these estimates, determine Seduak’s optimal capital structure
- Hilltop Paving has a levered equity cost of capital of 14.92 percent. The debt-to-value ratio is .4, the assumed tax rate is 23 percent, and the pretax cost of debt is 7.2 percent. What is the estimated unlevered cost of equity?Oblib Inc. has a debt-equity ratio of 2, and a weighted average flotation cost of 4%. What is the dollar flotation cost if the company were to raise $1.5 million in the capital market? Please if you can, show all calculations8.4 Richmond Clinic has obtained the following estimates for its costs of debt and equity at various capital structures: Debt (%) After-Tax Cost of Debt (%) Cost of Equity (%) 0 — 16.0 20 6.6 17.0 40 7.8 19.0 60 10.2 22.0 80 14.0 27.0 What is the firm’s optimal capital structure? (Hint: Calculate its corporate cost of capital at each structure. Also, note that data on component costs at alternative capital structures are not reliable in real-world situations)
- The calculation of a weighted average cost of capital (WACC) involves calculating the weighted average of the required rates of return on debt and equity, where the weights equal the percentage of each type of financing in the firm’s overall capital structure. what is the symbol that represents the cost of raising capital through retained earnings in the weighted average cost of capital (WACC) equation._________ Paolo Co. has $2.56 million of debt, $2.68 million of preferred stock, and $2.02 million of common equity. The appropriate weight of the firm's debt in the calculation of the company's weighted average cost of capital is_________%.What is the weighted average cost of capital on these financial accounting question?a) Calculate the weighted average cost of capital using following information: Total Cost of debt 4.40%. = 0.78 • Income tax rate Value of total debt = 16,595,600 OMR • Value of total debt = 6,595,325 OMR • Cost of equity %3D = 9.17% . b) Why weighted average cost of capital is important for capital structure decision making?
