Pearson Motors has a target capital structure of 30% debt and 70% common equity, with no preferred stock. The yield to maturity on the company's outstanding bonds is 10%, and its tax rate is 25%. Pearson's CFO estimates that the company's WACC is 10.40%. What is Pearson's cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places. %

Pearson Motors has a target capital structure of 30% debt and 70% common equity, with no preferred stock. The yield to maturity on the company's outstanding bonds is 10%, and its tax rate is 25%. Pearson's CFO estimates that the company's WACC is 10.40%. What is Pearson's cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places. %

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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Pearson Motors has a target capital structure of 35% debt and 65% common equity, with no preferred stock. The yield to maturity on the company's outstanding bonds is 12%, and its tax rate is 25%. Pearson's CFO estimates that the company's WACC is 10.70%. What is Pearson's cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places. Hide Feedback Incorrect
Lester's has expected earnings before interest and taxes of $57,800, an unlevered cost of capital of 10.2 percent, and debt with both a book and face value of $84,000. The debt has a coupon rate of 8.35 percent and the tax rate is 21 percent. What is the value of this company? $376,544 $596,973 $648,293 $456,666 O $389,304
Jace Motors has a target capital structure of 45% debt and 55% common equity, with no preferred stock. The yield to maturity on the company's outstanding bonds is 10%, and its tax rate is 25%. Jace's CFO estimates that the company's WACC is 12.00%. What is Jace's cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places.
The Nelson Company has $1,137,500 in current assets and $455,000 in current liabilities. Its initial inventory level is $310,000, and it will raise funds as additional notes payable and use them to increase inventory. How much can Nelson's short-term debt (notes payable) increase without pushing its current ratio below 1.8? Do not round intermediate calculations. Round your answer to the nearest dollar. $ What will be the firm's quick ratio after Nelson has raised the maximum amount of short-term funds? Do not round intermediate calculations. Round your answer to two decimal places.
No-Growth Industries pays out all of its earnings as dividends. It will pay its next $6 per share dividend in a year. The discount rate is 21%. a. What is the price-earnings ratio of the company? b. What would the P/E ratio be if the discount rate were 20%?
Compute the WACC of a firm that currently has $1 million in debt and $2 million in equity and $1 million in preferred stock. The current yield to maturity on the firms debt is 2%. Equity holders require a 6% return and preferred stock holders require a 3.8% return. The current tax rate that applies to the firm is 30%. Write your answer as a decimal.
Pearson Motors has a target capital structure of 30% debt and 70% common equity, with no preferred stock. The yield to maturity on the company's outstanding bonds is 12%, and its tax rate is 25%. Pearson's CFO estimates that the company's WACC is 11.70%. What is Pearson's cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places.

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