Stella Motors has $50m in assets, which is financed with 40% debt and 60% common equity. The company’s beta is currently 1.25 and its tax rate is 30%. Find Stella’s unlevered beta.
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- Stella Motors has $50m in assets, which is financed with 40% debt and 60% common equity. The company’s beta is currently 1.25 and its tax rate is 30%. Find Stella’s unlevered beta.
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- Hartman Motors has $24 million in assets, which were financed with $6 million of debt and $18 million in equity. Hartman’s beta is currently 1.25, and its tax rate is 30%. Use the Hamada equation to find Hartman’s unlevered beta, bU.Hartman Motors has $18 million in assets, which were financed with$6 million of debt and $12 million in equity. Hartman’s beta is currently 1.3, and its tax rateis 35%. Use the Hamada equation to find Hartman’s unlevered beta, bU.XYZ currently has a capital structure of 40% debt and 60% equity. XYZ's levered beta is 2.0 under its current capital structure. The firm's tax rate is 40%. What is the value of the XYZ's unlevered beta? show your answer to 1 decimal place (example: a beta of 1.2)
- Hartman Motors has $20 million in assets, which were financed with $5 million of debt and $15 million in equity. Hartman's beta is currently 1.3, and its tax rate is 40%. Use the Hamada equation to find Hartman's unlevered beta, bu. Do not round intermediate calculations. Round your answer to two decimal places.please answer questions 1 and 2 all parts and show working and formulas where necessary. Thanks in advance. 1. Tesla has $50m in assets, which is financed with 40% debt and 60% equity. The company's beta is currently 1.25 and its tax rate is 30%. Using the Hamada equation, find Tesla's unlevered beta. 2 Firms HD and L.D each has $30m in invested capital, $8m of EBIT, a tax rate of 25%. Firm HD has a D/E ratio of 50% with an interest rate of 8% on their debt. Firm D has a debt-to capital ratio of 30%, however, pays 9% interest on their debt. Calculate the following:a. Retum on invested capital for each firmb. Return on equity for each firmc. If HD's CFO is thinking of lowering the D/E from 50% to 40%, which will lower their interest rate further from 8% to 7%, calculate the new ROE for HD.Please see image to solve for question.
- Counts Accounting’s beta is 1.15 and its tax rate is 40%. If it is financedwith 20% debt, what is its unlevered beta?Sim Software Co trying to estimate its optimal capital structure. Right now, Simon has a capital structure that consists of 10 percent debt and 90 percent equity. The risk - free rate is 3 percent and the market risk premium is 8 percent. Currently, the company's cost of equity is 15 percent and its tax rate is 21 percent. What is the unlevered cost of equity?Digital Solutions Inc. has a capital structure of 40% debt and 60% equity, its tax rate is 30%, and its levered beta, b, is estimated to be 1.35. A financial analyst for Digital Solutions wants to estimate what the company's unlevered beta, bu, would be if it used no debt. Assume that the analyst will use the Hamada equation to determine the unlevered beta, what would be the estimate for bu? Note: bu b₁/[1 + (1 -T) x (D/E)]. = O 0.92 O 0.76 0.82 0.99
- Currently, Forever Flowers Inc. has a capital structure consisting of 30% debt and 70% equity. Forever's debt currently has an 7% yield to maturity. The risk-free rate (rRF) is 4%, and the market risk premium (rM - rRF) is 5%. Using the CAPM, Forever estimates that its cost of equity is currently 13%. The company has a 25% tax rate. What is Forever's current WACC? Round your answer to two decimal places. % What is the current beta on Forever's common stock? Round your answer to two decimal places. What would Forever's beta be if the company had no debt in its capital structure? (That is, what is Forever's unlevered beta, bU?) Do not round intermediate calculations. Round your answer to two decimal places. Forever's financial staff is considering changing its capital structure to 40% debt and 60% equity. If the company went ahead with the proposed change, the yield to maturity on the company's bonds would rise to 9.5%. The proposed change will have no effect on the…Currently, Forever Flowers Inc. has a capital structure consisting of 25% debt and 75% equity. Forever's debt currently has an 7% yield to maturity. The risk-free rate (rr) is 5%, and the market risk premium (rm- TRF) is 8%. Using the CAPM, Forever estimates that its cost of equity is currently 12.5%. The company has a 40% tax rate. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. Do not round intermediate calculations. Open spreadsheet a. What is Forever's current WACC? Round your answer to two decimal places. 11.925 % b. What is the current beta on Forever's common stock? Round your answer to two decimal places. 1.21 c. What would Forever's beta be if the company had no debt in its capital structure? (That is, what is Forever's unlevered beta, bu?) Round your answer to two decimal places. 1.00 X Forever's financial staff is considering changing its capital structure to 40% debt…DuraMax Inc. manufactures car radios and reported $ 75 million in operating income last year on revenues of $ 1 billion last year. The firm is all equity funded and you have computed a beta for the firm of 0.80. You have estimated the optimal debt ratio for the firm to be 40% debt, and you expect the firm to have S 20 million in interest expenses at that debt ratio. Using the interest coverage ratio table at the bottom of this page, estimate the cost of capital for DuraMax at the optimal debt ratio. The riskfree rate is 4%, the tax rate is 40% and the equity market risk premium is 4.82%. Interest Coverage Typical default spread 0.35% Ratio Rating AAA > 12.5 9.50 -12.50 AA 0.50% 7.50 - 9.50 6.00 – 7.50 4.50 - 6.00 A+ 0.70% 0.85% 1.00% BBB 1.50% 2.00% 4.00 – 4.50 3.50 – 4.00 BB+
