Sunshine Corp hired a new CFO and changed firm's policy from zero leverage to some leverage. They decided to add enough leverage till the firm value increased by 20%. Assume cashflows are level perpetual. Use data below: Risk Free Rate=5% Market Return=12% Unlevered Beta 1.5 Unlevered Cost of Capital=15.5% Find Sunshine's WACC with leverage Sunshine's WACC with leverge is 29.75 % (Round to two decimals) Use 99 if the answer is indeterminate

Sunshine Corp hired a new CFO and changed firm's policy from zero leverage to some leverage. They decided to add enough leverage till the firm value increased by 20%. Assume cashflows are level perpetual. Use data below: Risk Free Rate=5% Market Return=12% Unlevered Beta 1.5 Unlevered Cost of Capital=15.5% Find Sunshine's WACC with leverage Sunshine's WACC with leverge is 29.75 % (Round to two decimals) Use 99 if the answer is indeterminate

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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You have the following cash flows for the firm; What is NPV, if discount rate is 10% ? CF0 = -477 (CF0 is always negative. It is your initial investment) CF1 = 710 CF2 = 699 CF3 = 752 CF4 = 734 CF5 = 937
Your team was asked to compute for the cost of equity for prospect companies using CAPM method and the manager provided you the following information: Cisco Co. Salesforce Co. 3% Risk free rate Beta Market return Cost of equity 1.25 12% 14.50% 119 15% SAP SE Co. 4% 1.3 11.80% What is the market return for SAP SE Co? Answer: Adobe Co. 5% 1.4 8%
Consider the estimated beta values as of June 30, 2011, for the followingcompanies: Coca Cola 0.60 Microsoft 0.80 General Electric 1.20 Alcoa Inc. 1.45If the risk-free rate is 4.35% and the average market return is 11.5%, estimateeach company's cost of equity capital.
Give answer within 30 min please I will give you upvotes its very urgent ....thankyou...
A company has a 13% WACC. One of its core divisions is considering two mutuallyexclusive investments with the net cash flows given below. The division’s beta is βDIV= 1.45, risk free rate is kRF = 6.8% and risk-premium on the market is PRM =7% Year Project A Project B 0 -$1000 -$1000 1 $200 $800 2 $700 $600 3 $600 $250 4 $800 $150 5 -$300 $170 6 $250 $150 Given the information above, you are required to answer the followings:v. From your answers to Parts a, b, c and d, which project would be selected?vi. What is each project’s profitability index
Hamada equation Original % debt in capital structure, wd Original % common equity in capital structure, wc Risk-free rate, TRF Market risk premium, RPM Tax rate, T Firm's cost of equity, rs Calculation of firm's current beta: Firm's current beta, b Calculation of firm's unlevered beta: Firm's unlevered beta, bu New % of debt in capital structure, Wd New New % of common equity in capital structure, Wc New Calculation of firm's new beta: Firm's new beta, bL New Calculation of firm's new cost of equity: Firm's new cost of equity, rs New 30.00% 70.00% 5.00% 7.00% 40.00% 14.00% 50.00% 50.00% Formulas #N/A #N/A #N/A #N/A
You have the following cash flows for the firm; What is NPV, if discount rate is 10% ? CF0 = -433 (CF0 is always negative. It is your initial investment) CF1 = 969 CF2 = 697 CF3 = 824 CF4 = 727 CF5 = 922
Sub : FinancePls answer very fast.I ll upvote. Thank You An all-equity company decides to recapitalize. The company has an unlevered beta of 1.1, the market risk premium is 6% and the risk-free rate is 5%. The company's tax rate is 25%. If the company starts to borrow with a 25% debt ratio, what will be the levered beta using Hamada’s equation? What is the cost of equity before and after the recapitalization respectively? Why is the cost of equity higher after the recapitalization?
Speedy Delivery Systems can buy a piece of equipment that is anticipated to provide an 6 percent return and can be financed at 3 percent with debt. Later in the year, the firm turns down an opportunity to buy a new machine that would yield a 14 percent return but would cost 16 percent to finance through common equity. Assume debt and common equity each represent 50 percent of the firm's capital structure. a. Compute the weighted average cost of capital. Note: Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places. Weighted average cost of capital b. Which project(s) should be accepted? O New machine. O Piece of equipment. %
True or False: It is free for a company to raise money through retained earnings, because retained earnings represent money that is left over after dividends are paid out to shareholders. False True The cost of equity using the CAPM approach The current risk-free rate of return (TRF) is 3.86% while the market risk premium is 6.63%. The Monroe Company has a beta of 0.92. 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 approach The Lincoln Company is closely held and, therefore, cannot generate reliable inputs with which to use the CAPM method for estimating a company's cost of internal equity. Lincoln's bonds yield 11.52%, and the firm's analysts estimate that the firm's risk premium on its stock over its bonds is 4.95%. Based on the bond-yield-plus-risk-premium approach, Lincoln's cost of internal equity is: 19.76% 16.47% 15.65% O 18.12%
A manager believes his firm will earn a return of 12.50 percent next year. His firm has a beta of 1.40, the expected return on the market is 10.50 percent, and the risk-free rate is 3.50 percent. Compute the return the firm should earn given its level of risk. (Round your answer to 2 decimal places.) Required return % Determine whether the manager is saying the firm is undervalued or overvalued. O overvalued O undervalued
ces A manager believes his firm will earn a return of 23.80 percent next year. His firm has a beta of 1.69, the expected return on the market is 16.30 percent, and the risk-free rate is 6.30 percent. Compute the return the firm should earn given its level of risk. (Round your answer to 2 decimal places.) Required return Determine whether the manager is saying the firm is undervalued or overvalued.. undervalued % overvalued

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