pls Not use ai solve of this question general Accounting question Green Energy Corporation (GEC) uses only debt and common equity. It canborrow at an interest rate of 8% while maintaining its target capital structure of35% debt and 65% common equity. The company's last dividend (DO) was $2.00,with an expected constant growth rate of 5%, and its common stock currentlysells for $30. GEC's tax rate is 35%.

Step 1: Define Weighted Average Cost of Capital (WACC)The Weighted Average Cost of Capital (WACC) is…

Answered: Green Energy Corporation (GEC) uses…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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 False
Empire Electric Company (EEC) uses only debt and common equity. It can borrow unlimited amounts at an interest rate of rd = 11% as long as it finances at its target capital structure, which calls for 35% debt and 65% common equity. Its last dividend (D0) was $3.35, its expected constant growth rate is 3%, and its common stock sells for $24. EEC's tax rate is 25%. Two projects are available: Project A has a rate of return of 15%, and Project B's return is 8%. These two projects are equally risky and about as risky as the firm's existing assets. What is its cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places. % What is the WACC? Do not round intermediate calculations. Round your answer to two decimal places. % Which projects should Empire accept?
Empire Electric Company (EEC) uses only debt and common equity. It can borrow unlimited amounts at an interest rate of rd=9% as long as it finances at its target capital structure, which calls for 35% debt and 65% common equity. Its last dividend (D0) was $2.20, its expected constant growth rate is 6%, and its common stock sells for $26. EEC's tax rate is 25%. Two projects are available: Project A has a rate of return of 12.5% and Project B's return is 11.5%. These two projects are equally risky and about as risky as the firm's existing assets. A) What is its cost of common equity? B) What is the WACC? C) Which projects should Empire accept?
Empire Electric Company (EEC) uses only debt and common equity. It can borrow unlimited amounts at an interest rate of rd = 10% as long as it finances at its target capital structure, which calls for 25% debt and 75% common equity. Its last dividend (D 0) was $2.55, its expected constant growth rate is 3%, and its common stock sells for $ 22. EEC's tax rate is 25%. Two projects are available: Project A has a rate of return of 14%, and Project B's return is 8%. These two projects are equally risky and about as risky as the firm's existing assets. What is its cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places. % What is the WACC? Do not round intermediate calculations. Round your answer to two decimal places.
Bluegrass Mint Company has a debt-equity ratio of .30. The required return on the company's unlevered equity is 12 percent and the pretax cost of the firm's debt is 5.8 percent. Sales revenue for the company is expected to remain stable indefinitely at last year's level of $18,900,000. Variable costs amount to 70 percent of sales. The tax rate is 23 percent and the company distributes all its earnings as dividends at the end of each year. a. b. C- 1. C- un What is the value of the company's equity? (Do not round intermediate calculations and enter your answer in 2. dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89) C- u 3. If the company were financed entirely by equity, how much would it be worth? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89) d. What is the required return on the firm's levered equity? (Do not round intermediate calculations and enter…
BN Enterprises currently has no debt and a 15.9% cost of equity. The tax rate is 30%. BN plans to issue debt with a cost of 6.7%. The funds will be used to to repurchases shares with a resultant capital structure of 30% debt? What will BN's WACC be after the transaction?
Farmington Company can borrow at 7.05 percent. The company currently has no debt and the cost of equity is 11.45 percent. The current value of the firm is $660,000. The corporate tax rate is 23 percent. What will the value be if the company borrows $375,000 and uses the proceeds to repurchase shares?
Empire Electric Company (EEC) uses only debt and common equity. It can borrow unlimited amounts at an interest rate of rd = 11% as long as it finances at its target capital structure, which calls for 50% debt and 50% common equity. Its last dividend (D0) was $3.25, its expected constant growth rate is 3%, and its common stock sells for $22. EEC's tax rate is 40%. Two projects are available: Project A has a rate of return of 13%, and Project B's return is 10%. These two projects are equally risky and about as risky as the firm's existing assets. A. What is its cost of common equity? Round your answer to two decimal places. Do not round your intermediate calculations. B. What is the WACC? Round your answer to two decimal places. Do not round your intermediate calculations
Bolero Corporation has one long term loan (interest bearing debt) of $700,000 at an interest rate of 8%. The company has accounts payable of $300,000 (non-interest bearing) and equity of $1,000,000. It estimates that its cost of equity is 16%. Its tax rate is 35%. A. What is the company’s weighted average cost of capital on interest bearing debt and equity? B. What is Bolero Corporation’s weighted average cost of capital on all liabilities and equity (or total invested capital)?
Canopy Growth Corporation (CGC) has $3,127,000 in assets that are currently financed with 100% equity (Before). Its EBIT is $1,170,000, and its tax rate is 37.50%. If CGC changes its capital structure to include 45% debt (After), what is its ROE before and after the change? Assume that the interest rate on debt is 5.85%. A. (Before) 19.80% (After) 47.50% B. (Before) 23.39% (After) 35.49% C. (Before) 23.39% (After) 39.53% D. (Before) 23.39% (After) 47.50%
QuestionTireless Wheels Limited has no debt financing and has a value of $60 million and EBIT of $25 million. The firm is planning to change its capital structure by issuing $30 million in debt, and repurchasing requisite number of shares. The firm is estimated to pay 8 percent on interest expense. Its income is taxed at a per annum rate of 30%.a) What is the firm’s unlevered cost of equity?b) What is the firm’s levered cost of equity?c) What will be the firm’s WACC after the recapitalization?d) What change do you observe in the firm’s WACC before and after recapitalization? Why?
The Global Advertising Company has a tax rate of 40%. The company can raise debt at a 12% interest rate and the last dividend paid by Global was P0.90. Global’s common stock is selling for P8.59 per share, and its expected growth rate in earnings and dividend is 5%. If Global issue new common stock, the flotation cost incurred will be 10%. Global plans to finance all capital expenditures with 30% debt and 70% equity. What is Global’s weighed average cost of capital if the firm has sufficient retained earnings to fund the equity portion of its capital budget? What is Global’s weighted average cost of capital if the firm raised the equity portion by selling new shares of stock?

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