e. Kecewa Berhad is planning a RM50,000 expansion. The expansion is to be financed byRM20,000 debt and RM30,000 common stock. The before-tax cost of debt is 9% and thecost of common stock is 14%. If the corporate tax is 40%. Determine the WeightedAverage Cost of Capital (WACC) for Kecewa Berhad.

WACC = E/D+E * (re) + D/D+E*(rd)*(1-t) where E = equity amount D = debt amount re = cost of equity…

Answered: debt and RM30,000 common stock. The…

debt and RM30,000 common stock. The before-tax cost of debt is 9% and nmon stock is 14%. If the corporate tax is 40%. Determine the Weight st of Capital (WACC) for Kecewa Berhad.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Similar questions

The CFO of Yang Centers has asked you to calculate the EPS if the company were to change its capital structure from 0 percent debt to 90 percent debt. Calculate the EPS, rounded to the nearest $ 0.01, given the following information: Book value per share $ 8.75 Cost of debt 10 percent EBIT $ 500,000.00 Tax Rate 30 percent Total Capital $4,000,000.00
d) Calculate the after-tax Weighted Average Cost of Capital (WACC) for each capital structure.
The Company is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, The Company would have 431,811 shares of stock outstanding. Under Plan II, there would be 307,915 shares of stock outstanding and $4.9 million in debt outstanding. The interest rate on the debt is 8.66 percent, and there are no taxes. The breakeven EBIT is $
Coldstream Corp. is comparing two different capital structures. Plan I would result in 10,000 shares of stock and $100,000 in debt. Plan II would result in 5,000 shares of stock and $200,000 in debt. The interest rate on the debt is 6 percent. a. Ignoring taxes, compare both of these plans to an all-equity plan assuming that EBIT will be $60,000. The all-equity plan would result in 15,000 shares of stock outstanding. What is the EPS for each of these plans? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) EPS Plan I $ Plan II $ All equity $ b. In part (a), what are the break-even levels of EBIT for each plan as compared to that for an all-equity plan? (Do not round intermediate calculations.) EBIT Plan I and all-equity $ Plan II and all-equity $ c. Ignoring taxes, at what level of EBIT will EPS be identical for Plans I and II? (Do not round intermediate calculations.) EBIT…
BC Corporation has a weighted average cost of capital of 16%. What is its value if it will provide earnings to investors of P100,000 for the first year, P200,000 for the second year and P250,000 for every year onwards. a. P1,396,031.51 b. P1,225,861.02 c. P1,797,339.48 d. P1,617,271.54 e. None among the other choices
Bulldogs Inc.’s capital structure consists entirely of long-term debt and common equity. The cost of capital for long-term debt is 5% while for Common equity is 10%. If Bulldogs Inc.’s weighted average cost of capital is 6.50%, what proportion of the company’s capital structure is in the form of long-term debt? Assume that the tax rate is 40%.
TRU Inc. desires to maintain a capital structure of 90% equity and 10% debt. They currently have an effective tax rate of 40%. The company's cost of equity capital is 10%. To obtain their debt financing, they issue bonds with an interest rate of 15%. What is the company's weighted average cost of capital? A. 14.5% B. 9.9% C. 9.1% O D. 10.5%
DAR Corporation is comparing two different capital structures: an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, the company would have 195,000 shares of stock outstanding. Under Plan II, there would be 145,000 shares of stock outstanding and $2.1 million in debt outstanding. The interest rate on the debt is 8 percent annually, and there are no taxes. a. If EBIT is $550,000, what is the EPS for each plan? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) EPS $ $ Plan I Plan II b. If EBIT is $800,000, what is the EPS for each plan? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) EPS $ $ Plan I Plan II c. What is the break-even EBIT? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, e.g., 1,234,567.) Break-even EBIT
XYZ Inc. has a target capital structure of 60% equity and 40% debt. Its cost of equity is 9% and the before-tax cost of debt is 5%. The relevant tax rate is 21%. Calculate the WACC for the firm. (Enter percentages as decimals and round to 4 decimals)
ABC Inc. desires to maintain a capital structure of 80% equity and 20% debt. They currently have an effective tax rate of 30%. The company’s cost of equity capital is 12%. To obtain their debt financing, they issue bonds with an interest rate of 10%. What is the company’s weighted average cost of capital? a.8.0% b.11.0% c.11.6% d.10.4%
PT XYZ is a garment company that produces batik and other traditional clothing. The company's financial data is as follows.Earnings before interest and taxes or EBIT = Rp150.000.000 Corporate tax rate or TC = 25%Amount of debt or D = Rp600.000.000 Unlevered cost of capital or RU = 20% The cost of debt or RD = 8%Based on these financial data, determine:a. The value of company equityb. The value of company cost of equity
Shi Import-Export's balance sheet shows $300 million in debt, $50 million in preferred stock, and $250 million in total common equity. Shi's tax rate is 25%, rd = 6%, rps = 9.1%, and rs = 12%. If Shi has a target capital structure of 30% debt, 5% preferred stock, and 65% common stock, what is its WACC? Round your answer to two decimal places.

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