Blue Manufacturing Inc. has the following target capital structure: Target common equity weight: 55% • Target debt weight: 45% • Cost of equity: 12% . Cost of debt: 7% • Tax rate: 30% What is Blue Manufacturing's WACC?
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- Farma's Llamas has a weighted average cost capital need help this questionYou 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 help
- What proportion of a firm is equity financed if the WACC is 14%, the after-tax cost of debt is 7.0%, the tax rate is 35%, and the required return on equity is 17%? (Answer as a whole percentage, i.e. 5.25%, not 0.0525)Assume that your company is trying to determine its optimal capital structure, which consists only of debt and common stock. To estimate the cost of debt, the company has produced the following table: 09.86% 9.56% Percent Financed With Debt 10.16% 8.96% 9.26% 0.10 0.20 0.30 0.40 0.50 Percent Financed With Equity 0.90 0.80 0.70 0.60 0.50 Debt/Equity Ratio Now assume that the company's tax rate is 40 percent, that the company uses the CAPM to estimate its cost of common equity, Ks, that the risk-free rate is 5 percent and the market risk premium is 6 percent. Finally assume that if it has no debt its WACC would be equal to its cost of equity which would be equal to 11 percent (you should now be able to determine its "unlevered beta," bu). 0.10/0.90 0.11 0.20/0.80 0.25 Given this information, determine the firm's cost of capital if it finances with 40 percent debt and 60 percent equity. 0.30/0.70=0.43 0.40/0.600.67 0.50/0.50 = 1.00 Bond Rating AA A A BB B Before-Tax Cost of Debt 7.0% 7.2%…What is the WACC for the following company with: Debt rate: 7% Cost of Equity: 11% Percentage equity: 50% Percentage debt: 50% Tax rate: 35%
- The Beta Corporation has an optimal debt ratio of 40 percent. Its cost of equity capital is 12 percent, and its before-tax borrowing rate is 10 percent. Given a marginal tax rate of 35 percent. Required: a. Calculate the weighted-average cost of capital. b. Calculate the cost of equity for an equivalent all-equity financed firm. Complete this question by entering your answers in the tabs below. Required A dA Required B Calculate the weighted-average cost of capital. Note: Do not round intermediate calculations. Round your answer as a percent rounded to 2 decimal places. Weighted-average cost of capitalAs an Analyst you were tasked to compute for the Weighted Average Cost of Capital of variouscompanies given the following information. Income tax rate is 25% a. What is the cost of equity of each companies?b. What is the after tax cost of debt of each companies?c. What is the WACC of each companies? W Corp A Corp Co. Corp Ca Corp Risk Free rate 4.00% 3.00% 2.00% 3.50% Beta 1.25 % 1.50% 1.30% 1.40% Market Return 12.00% 11.00 % 10:00% 8:00% Debt to Equity Ratio 2.5 3 4 3.5 Credit Spread om BPS 200 300 250 150Given the solution accounting
- Richmond Clinic has obtained the following estimates for its costs of debt and equity at various capital structures: After-Tax Percent Cost of Cost of Debt Debt Equity 0% 16% 20% 6.6% 17% 40% 7.8% 19% 60% 10.2% 22% 80% 14.0% 27% What is the firms optimal capital structure? Please provide your answers in the following format: xx% Note: no decimals required. What percent equity? 15% What percent debt? 40%Suppose Alcatel-Lucent has an equity cost of capital of 9.2%, market capitalization of $10.95 billion, and an enterprise value of $15 billion. Suppose Alcatel-Lucent's debt cost of capital is 6.9% and its marginal tax rate is 38%. a. What is Alcatel-Lucent's WACC? b. If Alcatel-Lucent maintains a constant debt-equity ratio, what is the value of a project with average risk and the expected free cash flows as shown here,? c. If Alcatel-Lucent maintains its debt-equity ratio, what is the debt capacity of the project in part (b)? a. What is Alcatel-Lucent's WACC? Alcatel-Lucent's WACC is%. (Round to two decimal places.) Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Year 0 1 FCF ($ million) - 100 50 Print C Done 2 99 3 66 XFind the WACC given the following information: A firm has a cost of equity of 8% and cost of debt of 6.5%. The debt - toequity ratio is 0.75. The tax rate is 15%.
