Epson has one bond outstanding with a yield to maturity of 5% and a coupon rate of 8%. The company has no preferred stock. Epson's beta is 1.1, the risk-free rate is 3.1% and the expected market risk premium is 6%. Epson has a target debt/equity ratio of 0.7 and a marginal tax rate of 34%. What is Epson's (pre-tax) cost of debt?
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Epson has one bond outstanding with a yield to maturity of 5% and a coupon rate of 8%. The company has no
Epson has a target debt/equity ratio of 0.7 and a marginal tax rate of 34%.
What is Epson's (pre-tax) cost of debt?
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- Epson has one bond outstanding with a yield to maturity of 5% and a coupon rate of 8%. The company has no preferred stock. Epson's beta is 1.5, the risk-free rate is 2.2% and the expected market risk premium is 6%. Epson has a target debt/equity ratio of 0.7 and a marginal tax rate of 34%. 1. What is Epson's (pre-tax) cost of debt? 2. What is Epson's cost of equity? 3. What is Epson's capital structure weight for equity, i.e., the fraction of long-term capital provided by equity? 4. What is Epson's weighted average cost of capital?Infosystems, Inc. has a debt/equity ratio = 2. The firm has a cost of equity of 12% and a cost of debt of 6%. Calculate the firm’s equity’s beta (β) after the target debt/equity ratio changes to 1.5. Assume that the cost of debt does not change. Ignore taxes and other market imperfections. The risk-free interest rate is 2% and the market risk premium is 7%.A company has a target debt-to-equity ratio 2/3. The firm has no preferred stock. The firm's bonds have a coupon rate of 9% and YMT of 8.5%, and the firm is subject to a 30% corporate tax rate. The firm has common stock with a beta of 1.41. The risk free rate on treasury bills is 4% and the expected market risk premium is 10%. What is the minimum after-tax rate of return that the company must earn on its investments?
- The current risk-free rate of return (TRF) is 4.23% while the market risk premium is 6.63%. The Monroe Company has a beta of 0.78. Using the capital asset pricing model (CAPM) approach, Monroe's cost of equity is The cost of equity using the bond yield plus risk premium a O 17.29% The Hoover Company is closely held and, therefore, cannot gener cost of internal equity. Hoover's bonds yield 10.28%, and the firm 3.55%. Based on the bond-yield-plus-risk-premium approach, Ho 9.87% 13.14% O 13.83% O 15.21% O 15.55% 11.28% O 11.52% 9.40% The cost of equity using the discounted cash flow (or dividend growth) approach O 12.10% Grant Enterprises's stock is currently selling for $32.45 per share, and the firm expects its per-share dividend to be $1.38 in one year. Analysts project the firm's growth rate to be constant at 7.27%. Estimating the cost of equity using the discounted cash flow (or dividend growth) approach, what is Grant's cost of internal equity? O 10.94% 8.46% inputs with which to…A firm has a return on assets of 7.8 percent and a cost of equity of 11.9 percent. What is the pretax cost of debt if the debt–equity ratio is .72? Ignore taxes.XYZ Corp. has a debt-to-equity ratio of 0.6 and an equity beta of 1.7. What will be the firm’s equity beta if it changes its target debt-to-equity ratio to 0.75? Assume the firm has risk-free debt.
- Suppose Simmons' common stock has a beta of 1.37, the risk-free rate is 3.4% and the market risk premium is 8.2%. The yield to maturity on the firm's bonds is 7.6% and the debt-equity ratio is .45. What is the WACC if the tax rate is 23% and all interest is tax deductible?A firm has a debt-to-equity ratio of 1.20. If it had no debt, its cost of equity would be 15%. Its cost of debt is 10%. What is its cost of equity if there are no taxes or other imperfections? A. 10% B. 15% C. 18% D. 21% E. None of these.Clifford, Inc., has a target debt-equity ratio of .80. Its WACC is 9.1 percent, and the tax rate is 25 percent. a. If the company's cost of equity is 13 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., 32.16.) b. If instead you know that the aftertax cost of debt is 5.8 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., 32.16.) a. Cost of debt % b. Cost of equity %
- The following were gathered for estimating the cost of equity of KKK Corporation: Return on Treasury Bonds = 4%; Return on the Market = 10%; Return on KKK Bonds = 6%. Upon analysis, you determined that the beta of KKK shares relating to the market return is 1.2 while a risk premium of 4% should be given to KKK's investors over its creditors. How much is the cost of equity using the bond plus risk premium?Astromet is financed entirely by common stock and has a beta of 1.50. The firm pays no taxes. The stock has a price-earnings multiple of 14.0 and is priced to offer a 10.6% expected return. The company decides to repurchase half the common stock and substitute an equal value of debt. Assume that the debt yields a risk-free 4.2%. Calculate the following: Required: a. The beta of the common stock after the refinancing b. The required return and risk premium on the common stock before the refinancing c. The required return and risk premium on the common stock after the refinancing d. The required return on the debt e. The required return on the company (i.e., stock and debt combined) after the refinancing If EBIT remains constant: f. What is the percentage increase in earnings per share after the refinancing? g-1. What is the new price-earnings multiple? g-2. Has anything happened to the stock price? Complete this question by entering your answers in the tabs below. Req A to E Req F to G2…stromet is financed entirely by common stock and has a beta of 1.70. The firm pays no taxes. The stock has a price-earnings multiple of 14.0 and is priced to offer a 10.4% expected return. The company decides to repurchase half the common stock and substitute an equal value of debt. Assume that the debt yields a risk-free 4.2%. Calculate the following: Required: a. The beta of the common stock after the refinancing b. The required return and risk premium on the common stock before the refinancing c. The required return and risk premium on the common stock after the refinancing d. The required return on the debt e. The required return on the company (i.e., stock and debt combined) after the refinancing If EBIT remains constant: f. What is the percentage increase in earnings per share after the refinancing? g-1. What is the new price-earnings multiple? g-2. Has anything happened to the stock price?