DvE7A1Calibri (Body)11B...Mabく Generalvx✓ fxBCDEFGHJK23Ursala, Inc., has a target debt-equity ratio of .65. Its WACC is 10.4percent, and the tax rate is 23 percent.a. If the company's cost of equity is 14 percent, what is its pretax costof debt?b. If instead you know that the aftertax cost of debt is 5.8 percent,what is the cost of equity?st4Input Area:56Debt-equity ratio0.657WACC10.40%8Tax rate23%9a. Cost of equity14%5.80%10 b. Aftertax cost of debt1112 (Use cells A6 to C10 from the given information to complete this question.)1314Output Area:1516 a. RD17 lb. RF

Part A: Finding the Pretax Cost of DebtGiven:Debt-equity ratio (D/E) = 0.65WACC (Weighted Average…

Answered: Dv E7 A 1 Calibri (Body) 11 B ... Mab く…

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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Case 2: The risk-free rate is 1.20%, return on market is 13.00%, and corporate tax rate is 20%. Baltic & Friends Corporation is considering four levels of debt financing as in the table below. The manager wishes to select "the right proportion" of debt financing for the company. Currently the firm has no debt financing, and its beta equals 0.85. D/A ratio (%) Interest rate before tax (%) 10 3.80% 25 4.20% 40 4.75% 55 4.90% Questions Answers 1. Calculate cost of equity with leveraged beta at 10% debt 2. Calculate cost of equity with leveraged beta at 25% debt 3. Calculate cost of equity with leveraged beta at 40% debt 4. Calculate cost of equity with leveraged beta at 55% debt % % % % 5. Calculate WACC at 10% debt 6. Calculate WACC at 25% debt 7. Calculate WACC at 40% debt 8 Calculate WACC at 55% debt di % % % %
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Schmidt and Sons Co. has an optimal debt-equity ratio of 1.5. To issue new equity, the company must pay a flotation cost of 5%. To issue new bonds, the flotation cost is 3%. What is the weighted average flotation for the company? Multiple Choice O O O 4.8% 3.2% 3.8% 2.8% 4.2%
Company Y has a target debt to equity ratio of 50%. Currently its book debt to equity ratio is 60% and it expects to revert to the target ratio very soon. The company has an after-tax market cost of debt of 9% and a market cost of equity of 20%. What is the WACC for the company? a. 14.33% b. 13.50% c. 12.33% d. 16.51%
ont question Kose, Inc., has a target debt-equity ratio of 1.63. Its WACC is 7.4 percent, and the tax rate is 25 percent. Required: If the company's cost of equity is 15 percent, what is its pretax cost of debt? (Do not round Intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 3216.) a. b. If instead you know that the aftertax cost of debt is 5.6 percent, what is the cost of equity? (Do not round Intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 3216.)
Pm.6
Precision Cuts has a target debt-equity ratio of .48. Its cost of equity is 16.4 percent, and its pretax cost of debt is 8.2 percent. If the tax rate is 21 percent, what is the company's WACC? Group of answer choices A) 13.18% B) 11.72% C) 12.91%
Fama's Llamas has a WACC of 9.8 percent. The company's cost of equity is 13 percent, and its pretax cost of debt is 7.5 percent. The tax rate is 21 percent. What is the company's target debt-equity ratio? Note: Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616. Debt-equity ratio
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Take It All Away has a cost of equity of 10.45 percent, a pretax cost of debt of 5.21 percent, and a tax rate of 21 percent. The company's capital structure consists of 65 percent debt on a book value basis, but debt is 25 percent of the company's value on a market value basis. What is the company's WACC? Multiple Choice ● O O O 9.14% 8.17% 12.39% 9.75% 8.87%

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