Crystal Ventures requires $750,000 in assets and will be 100% equity financed. If the Earnings before Interest and Taxes (EBIT) is $90,000 and the tax rate is 25%, what is the Return on Equity (ROE)?
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- Planet Express has liabilities of $400 and assets of $1000. The average YTM on its debt is 10% and the tax rate is 20%. The company has announced $1 annual dividends in perpetuity and has a stock price of $5. What is the company’s weighted average cost of capital (WACC)? Why is the tax rate included in the WACC? How can the WACC be used to evaluate potential investments?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 calculationsThe Inc. is expected to pay a $2.50 dividend at year end (so D1 = $2.50). The dividend’s growth rate = 5.50% per year. The current stock price = $52.50 per share. The before-tax cost of debt is 7.50%. The tax rate = 40%. The target capital structure is 45% debt and 55% common equity. How much is the Inc’s? 7.07% 7.36% 7.67% 7.98%
- The cost of capital is 15%, the before-tax cost of debt is 9%, and the mar-ginal income tax rate is 40%. The market value of debt is $50 million and the market value of equity is $50 million. What is the cost of equity?Sorenson Systems, Inc. is expected to pay a dividend of $3.30 at year end (D1), the dividend is expected to grow at a constant rate of 5.5% a year, and the common stock currently sells for $37.50 a share. The before-tax cost of debt is 7.5%, and the tax rate is 40%. The target capital structure consists of 45% debt and 55% common equity. What is the company's WACC if all the equity is used from retained earnings?Your answer should be between 7.36 and 12.57, rounded to 2 decimal places, with no special characters.Reingaart Systems is expected to pay a $3.4 dividend at year end (D1 = $3.4), the dividend is expected to grow at a constant rate of 5.8% a year, and the common stock currently sells for $65 a share. The before-tax cost of debt is 7.8%, and the tax rate is 29%. The target capital structure consists of 56% debt and 44% common equity. What is the company's WACC if all equity is from retained earnings? O 8.55% O 7.65% O 7.95% O 7.35% 8.25%
- Target Corporation (TGT) has $2.14 million in assets that are currently financed with 100% equity. TGT’s EBIT is $385,000, and its tax rate is 25%. If TGT changes its capital structure to include 50% debt, its return on equity will increase. Assume the interest rate on debt is free. (justify your answer with numerical calculation) True FalseSorensen Systems Inc. is expected to pay a $2.00 dividend at year end (D1 = $2.00), the dividend is expected to grow at a constant rate of 5.0% a year, and the common stock currently sells for $50.00 a share. The before-tax cost of debt is 6%, and the tax rate is 41%. The target capital structure consists of 40% debt and 60% common equity. What is the company’s WACC if all the equity used is from retained earnings?Vienna Inc. currently has a capital structure that consists of 100% equity. The risk-free rate is 3%, and the market risk premium is 8%. The company's current cost of equity is 9%, and its tax rate is 30%. If Vienna Inc. were to change its capital structure to 30% debt and 70% equity, what would be the company's estimated cost of equity?
- Sorensen Systems Inc. is expected to pay a $2.50 dividend at year end (D1 = $2.50), the dividend is expected to grow at a constant rate of 5.50% a year, and the common stock currently sells for $87.50 a share. The before-tax cost of debt is 7.50%, and the tax rate is 25%. The target capital structure consists of 45% debt and 55% common equity. What is the company's WACC if all the equity used is from retained earnings? Do not round your intermediate calculations.Sorensen Systems Inc. is expected to pay a $2.50 dividend at year end (D1 = $2.50), the dividend is expected to grow at a constant rate of 5.50% a year, and the common stock currently sells for $87.50 a share. The before-tax cost of debt is 7.50%, and the tax rate is 25%. The target capital structure consists of 45% debt and 55% common equity. What is the company's WACC if all the equity used is from retained earnings? Do not round your intermediate calculations. a. 5.69% b. 7.35% c. 5.10% d. 7.13% e. 6.62%A firm's cost of equity Ue) is 25%. Its before-tax cost of debt is 12%, and itsmarginal tax rate is 40%. The firm's capital structure calls for a debt-to-equityratio of 40%. Calculate the firm's cost of capital (k).