Suppose SnowWhite's common stock has a beta of 1.37, the risk-free rate is 3.4 percent, and the market risk premium is 8.2 percent. SnowWhite has equity with a market value of $1 million and debt with a market value of $ 0.45 million. The cost of debt is 7.6 percent. What is the WACC if the tax rate is 23 percent and all interest is tax deductible?
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A:
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A: Target debt ratio = 30% Cost of debt = 6% Risk free rate = 3% Expected market risk premium = 6%…
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A: A levered company is a company which has both debt and equity in its capital structure. It involves…
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A: Coupon rate = 0.09 Yield to maturity = 0.10 Marginal Tax rate= 0.40
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A: Fist we need to calculate cost of equity by using CAPM model. Cost of equity =Risk free rate…
Q: onsider a firm whose debt has a market value of $35 million and whose stock has a market value of…
A: given, debt = $35 million Equity = $55 million rd×1-t=5.53%re=13.915%
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A: In this question, we are required to determine the cost of internal equity.
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A: Hi! Thank you for the question, As per the honor code, we are allowed to answer one question at a…
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- Suppose Simmons' common stock has a beta of 1.37, the risk-free rate is 3.4% and the market risk premium is 8.2%. The yield to maturity on the firm's bonds is 7.6% and the debt-equity ratio is .45. What is the WACC if the tax rate is 23% and all interest is tax deductible?What happens to ROE for Firm U and Firm L if EBIT falls to $1,600? What happens if EBIT falls to $1,200? What is the after-tax cost of debt? What does this imply about the impact of leverage on risk and return?You want to estimate the Weighted Average Cost of Capital (WACC) for Levi Inc. The company’s tax rate is 21% and it has the equity beta of 1.24. Its debt value is $2,304 million and the equity market value is $70,080 million. The company’s interest expense is $83 million. Assume that the risk-free rate is 5% and the market return is 12%. Based on the information, compute the WACC for Levi
- Relever Inc. has a debt-to-equity (D/E) ratio of 0.3 ; its target D//E is 1.5 . Relever currently has an estimated beta of 1.7. Relever's estimated tax rate is 30 percent. What is the estimate of Relever's beta at its target D/E? Relever's beta at its target (D//E)^(**) of 1.5 is estimated to be (Ursala, Incorporated, has a target debt-equity ratio of 1.25. Its WACC is 8.4 percent and the tax rate is 23 percent. If the company’s cost of equity is 12.4 percent, what is its pretax cost of debt? If instead you know that the aftertax cost of debt is 3.6 percent, what is the cost of equity?9. Determining the optimal capital structure Aa Aa Understanding the optimal capital structure Review this situation: Transworld Consortium Corp. is trying to identify its optimal capital structure. Transworld Consortium Corp. has gathered the following financial information to help with the analysis. Debt Ratio Equity Ratio EPS DPS Stock Price 30% 70% 1.55 0.34 22.35 40% 60% 1.67 0.45 24.56 50% 50% 1.72 0.51 25.78 60% 40% 1.78 0.57 27.75 70% 30% 1.84 0.62 26.42 Which capital structure shown in the preceding table is Transworld Consortium Corp.'s optimal capital structure? Debt ratio 50%; equity ratio 50% Debt ratio = 30%; equity ratio = 70% Debt ratio 70%; equity ratio 30% Debt ratio = 40%; equity ratio = 60% Debt ratio 60%; equity ratio = 40% Consider this case: Globex Corp. has a capital structure that consists of 30% debt and 70% equity. The firm's current beta is 1.15, but management wants to understand Globex Corp.'s market risk without the effect of leverage. If Globex Corp. has…
- Starset, Incorporated, has a target debt-equity ratio of 0.76. Its WACC is 10.5 percent, and the tax rate is 32 percent. If the company's cost of equity is 14.5 percent, what is the pretax cost of debt? If instead you know that the aftertax cost of debt is 6.7 percent, what is the cost of equity?Your firm has a target debt ratio of 30%. Cost of debt (Rb) is 6%. The risk-free rate is 3% and the expected market risk premium is 6%. Your firm's unlevered (asset) beta is 1. What is the appropriate rate to discount the interest tax shields associated with your debt? Only typed answer1) Counts Accounting has a beta of 1.50. The tax rate is 35%, and Counts is financed with 40% debt. What is Counts' unlevered beta? Round your answer to two decimal places. (2) Ethier Enterprise has an unlevered beta of 1.05. Ethier is financed with 45% debt and has a levered beta of 1.15. If the risk free rate is 5% and the market risk premium is 5%, how much is the additional premium that Ethier's shareholders require to be compensated for financial risk?
- Calculate the company's asset beta, if the firm's equity beta is 1.6, the debt equity ratio is 0.6 and the marginal tax rate is 30%. Select a O O 1.1268 2.1268 O 1.2618 2.2164) If the market risk premium is 8 percent, then according to the CAPM, the risk premium of a stock with beta value of 1.7 must be A) less than 12 percent. B) 12 percent. C) greater than 12 percent. D) The answer cannot be determined. 5) Suppose that your firm's current unlevered value, V*, is $800,000, and its marginal corporate tax rate is 21 percent. Also, you model the firm's PV of financial distress as a function of its debt level according to the relation: PV of financial distress = 800,000 × (D/V*)². What is the firm's levered value if it issues $200,000 of perpetual debt to buy back stock? A) $792,000. B) $869,555. C) $920,000. D) $350,000. 6) The statement that stock prices follow a random walk implies that I) successive price changes are independent of each other; II) successive price changes are positively related; III) successive price changes are negatively related; IV) the autocorrelation coefficient is either +1.0 or –1.0 A) I only B) II and III only C) IV only D) III…The unlevered bheta is 1, D/E is 60/40 and the tax rate is .3. Additionally, we know the treasury bond rate is .08 and the ROR of the S&P has been 10%. Derive the stock price of Mahir, if Mahir pays a dividend of $12 per share and it will not grow in the future.