Sun Products Company (SPC) uses only debt and equity. It can borrow unlimited amounts at an interest rate of 12% so long as it finances at its target capital structure, which calls for 45% debt and 55% common equity. Its last dividend was $2.40, its expected constant growth rate is 5%, and its stock sells for $24. What is SPC's cost of equity?
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- help me to solve this questionsSuppose PayPal (PYPL) has no debt and an equity cost of capital of 9.7 %. The average debt-to- value ratio for the credit services industry is 15.4 %. What would its cost of equity be if it took on the average amount of debt for its industry at the cost of debt of 6%?Suppose PayPal (PYPL) has no debt and an equity cost of capital of 9%. The average debt-to-value ratio for the credit services industry is 15.1%. What would its cost of equity be if it took on the average amount of debt for its industry at a cost of debt of 6.1%? (Round to two decimal places.)
- An unlevered firm has expected earnings of $2,401 and a market value of equity of $19,600. The firm is planning to issue $4,000 of debt at 6 percent interest and use the proceeds to repurchase shares at their current market value. Ignore taxes. What will be the cost of equity after the repurchase?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.Abc
- Tomorrow Co is financed entirely by equity that is priced to offer a 14% expected return on equity. If the company repurchases 40% of equity and substitutes an equal value of debt yielding 8%, what is the expected return on equity after refinancing? (Ignore taxes and cost of financial distress.)The Rivoli Company has no debt outstanding, and its financial position is given by the following data: What is Rivoli’s intrinsic value of operations (i.e., its unlevered value)? What is its intrinsic stock price? Its earnings per share? Rivoli is considering selling bonds and simultaneously repurchasing some of its stock. If it moves to a capital structure with 30% debt based on market values, its cost of equity, rs, will increase to 12% to reflect the increased risk. Bonds can be sold at a cost, rd, of 7%. Based on the new capital structure, what is the new weighted average cost of capital? What is the levered value of the firm? What is the amount of debt? Based on the new capital structure, what is the new stock price? What is the remaining number of shares? What is the new earnings per share?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.
- 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 calculationsEmpire 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 $2.85, its expected constant growth rate is 5%, and its common stock sells for $29. 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 10%. 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?1) A firm that is currently unlevered has WACC = rS = 10%/year. This company plans to do a recapitalization by issuing debt and repurchasing equity. After the recapitalization, the debt-to-equity (D/E) ratio will be 0.5. If the cost of debt, rD, is 6%, what will be rS after the recapitalization? 2) A firm with wD = 0.35 and wS = 0.65 plans to issue another $100 million of permanent debt. The firm's tax rate is 21%. The bonds will be issued at par with coupon rate = rD = 7%/year. The firm's WACC is 11%/year. By how much will the new debt change the value of the firm, and who will receive this value? A) Firm value will increase by $21 million, and all $21 million will go to the shareholders B) Firm value will increase by $9 million, and 35% will go to the bondholders, 65% to the shareholders C) Firm value will increase by $18.6 million, and 35% will go to the bondholders, 65% to the stockholders D) Firm value will increase by $21 million, and all $21 million will go to the…
