The common stock and debt of Android Corp. are valued at $61 million and $30 million, respectively. Investors currently require a 14% return on the common stock and an 6% return on the debt. There are no taxes. Calculate the weighted average cost of capital. Enter your answer as a percentage. Do not include the percentage sign in your answers. Enter your answer rounded to 2 DECIMAL PLACES. WACC 8.62 Correct response: 11.36±0.02 Click "Verify" to proceed to the next part of the question. This question has 3 parts, so you will be clicking verify 3 times. Suppose Android Corp. had an additional $12 million of debt and had $12 million less of common stock, what would be the expected return on the stock? Assume that the change in capital structure would not affect the risk of the debt, and recall that the WACC under the initial capital structure is 11.36%. Enter your answer a percentage. Do not include the percentage sign in your answer. Enter your answer rounded to 2 DECIMAL PLACES. "E = 14.63 × Correct response: 15.95±0.02 Click "Verify" to proceed to the next part of the question. Suppose you would like to be able to invest in the firm if they had the capital structure above with a 15.95% return on the common stock and a WACC of 11.36%. If you have $1,500 to invest, how much should you invest in the stock and bonds of the original firm (which have returns of 14% and 6%, respectively) to obtain the same return as an investment in the stock of the firm if it had $42 million of debt and $49 million of equity? Enter your answers rounded to 2 DECIMAL PLACES. Amount into equity = Number Amount into debt = Number Click "Verify" to proceed.
The common stock and debt of Android Corp. are valued at $61 million and $30 million, respectively. Investors currently require a 14% return on the common stock and an 6% return on the debt. There are no taxes. Calculate the weighted average cost of capital. Enter your answer as a percentage. Do not include the percentage sign in your answers. Enter your answer rounded to 2 DECIMAL PLACES. WACC 8.62 Correct response: 11.36±0.02 Click "Verify" to proceed to the next part of the question. This question has 3 parts, so you will be clicking verify 3 times. Suppose Android Corp. had an additional $12 million of debt and had $12 million less of common stock, what would be the expected return on the stock? Assume that the change in capital structure would not affect the risk of the debt, and recall that the WACC under the initial capital structure is 11.36%. Enter your answer a percentage. Do not include the percentage sign in your answer. Enter your answer rounded to 2 DECIMAL PLACES. "E = 14.63 × Correct response: 15.95±0.02 Click "Verify" to proceed to the next part of the question. Suppose you would like to be able to invest in the firm if they had the capital structure above with a 15.95% return on the common stock and a WACC of 11.36%. If you have $1,500 to invest, how much should you invest in the stock and bonds of the original firm (which have returns of 14% and 6%, respectively) to obtain the same return as an investment in the stock of the firm if it had $42 million of debt and $49 million of equity? Enter your answers rounded to 2 DECIMAL PLACES. Amount into equity = Number Amount into debt = Number Click "Verify" to proceed.
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
Related questions
Question
Transcribed Image Text:The common stock and debt of Android Corp. are valued at $61 million and $30 million, respectively. Investors currently require a 14% return on the common
stock and an 6% return on the debt. There are no taxes.
Calculate the weighted average cost of capital. Enter your answer as a percentage. Do not include the percentage sign in your answers. Enter your answer
rounded to 2 DECIMAL PLACES.
WACC 8.62
Correct response: 11.36±0.02
Click "Verify" to proceed to the next part of the question. This question has 3 parts, so you will be clicking verify 3 times.
Suppose Android Corp. had an additional $12 million of debt and had $12 million less of common stock, what would be the expected return on the stock?
Assume that the change in capital structure would not affect the risk of the debt, and recall that the WACC under the initial capital structure is 11.36%. Enter
your answer a percentage. Do not include the percentage sign in your answer. Enter your answer rounded to 2 DECIMAL PLACES.
"E
= 14.63
×
Correct response: 15.95±0.02
Click "Verify" to proceed to the next part of the question.
Suppose you would like to be able to invest in the firm if they had the capital structure above with a 15.95% return on the common stock and a WACC of
11.36%. If you have $1,500 to invest, how much should you invest in the stock and bonds of the original firm (which have returns of 14% and 6%,
respectively) to obtain the same return as an investment in the stock of the firm if it had $42 million of debt and $49 million of equity? Enter your answers
rounded to 2 DECIMAL PLACES.
Amount into equity = Number
Amount into debt =
Number
Click "Verify" to proceed.
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