The Two Dollar Store has a cost of equity of 12.3 percent, the YTM on the company's bonds is 5.8 percent, and the tax rate is 39 percent. If the company's debt–equity ratio is .58, what is the weighted average cost of capital?

The Two Dollar Store has a cost of equity of 12.3 percent, the YTM on the company's bonds is 5.8 percent, and the tax rate is 39 percent. If the company's debt–equity ratio is .58, what is the weighted average cost of capital?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter12: Balanced Scorecard And Other Performance Measures

Section: Chapter Questions

Problem 7EB: Assume Plainfield Manufacturing has debt of $6,500,000 with a cost of capital of 9.5% and equity of...

See similar textbooks

Related questions

Q: Take It All Away has a cost of equity of 10.51 percent, a pretax cost of debt of 5.25 percent, and a…

A: Weighted Average Cost of Capital (WACC) is a financial metric that represents the average cost of…

Q: ROA?

A: Definition of Operating ROA:Operating Return on Assets (ROA) measures a company's efficiency in…

Q: Yellow Submarine, Co. has a cost of equity of 10.84 percent, a cost of debt of 5.47 percent, and a…

A: The Weighted Average Cost of Capital (WACC) is a pivotal financial metric representing a company's…

Q: Suppose Alcatel-Lucent has an equity cost of capital of 10.4%, market capitalization of $11.52…

A: WACC = (Cost of equity x Weight of equity) + (Cost of debt x (1-tax rate) x Weight of debt)Weight of…

Q: Oblib Inc. has a debt-equity ratio of 2, and a weighted average flotation cost of 4%. What is the…

A: Amount to be raised=$1.5 millionWeighted average flotation cost=4%

Q: A firm has an ROE of 4.4%, a debt-to-equity ratio of 0.7, and a tax rate of 35% and pays an interest…

A: Given:ROE of firm =4.4%Debt to equity ratio=0.7Tax rate=35%Interest on debt =5%To compute:Operating…

Q: First National Bank has a debt-to-equity ratio of 3. Its weighted average cost of capital is 12.50%…

A: Cost of CapitalThe cost of capital refers to the expense a company incurs in order to finance its…

Q: Jack Corporation has a profit margin of 9.70 percent, total asset turnover of 1.50, an ROF of 18.62…

A: ROE=18.62Profit margin=9.70Assets turnover=1.50How much is debt-equity ratio.

Q: Before-tax cost of debt for a company is 6.35%, while the after-tax cost of debt is 5.49%. What is…

A: Before-tax cost of debt = 6.35%After-tax cost of debt = 5.49%We need to determine the company's tax…

Q: Consider a firm that has 15% of debt. The rate of return for debt is 6% and the rate of return for…

A: Weight of debt of firm(Wd) =15%

Q: Williamson, Inc., has a debt-equity ratio of 2. The firm's weighted average cost of capital is 10…

A: Given: Debt to equity = 2 WACC = 10% cost of equity re=21.6% tax = 30%

Q: Petra plc. has a current and target leverage ratio of 0.8, the finance cost from loans is 16 per…

A: Weighted cost of capital: It can be defined as the rate that is paid by the company on the average…

Q: Blitz Industries has a debt-equity ratio of 1.7. Its WACC is 8.1 percent, and its cost of debt is…

A: Data given : Debt-equity ratio = 1.7:1 WACC = 8.1% Cost of debt = 5.7% Corporate tax rate = 23%

Q: Benjamin Manufacturing has a target debt-equity ratio of .45. Its WACC is 11.2%, and its cost of…

A: The cost of equity signifies the expected rate of return a company needs to deliver on its equity…

Q: A firm has a cost of debt of 6.5 percent and a cost of equity of 10.1 percent. The debt–equity ratio…

A: Solution:Weighted Average Cost of Capital (WACC) means the average cost of capital for the firm…

Q: Fama’s Llamas has a weighted average cost of capital of 10.4 percent. The company’s cost of equity…

A: WACC = 10.40% Cost of equity = 13% Pretax cost of debt =7.90% After tax cost of debt = Pretax cost…

Q: Suppose Alcatel-Lucent has an equity cost of capital of 9.2%, market capitalization of $10.95…

Q: Fama's Llamas has a weighted average cost of capital of 9.3 percent. The company's cost of equity is…

A: The WACC of the company refers to the return that the company provides to all its stakeholders for…

Q: The calculation of WACC involves calculating the weighted average of the required rates of return on…

A: The problem involves Weighted Average Cost of Capital or WACC. The most common sources of capital…

Q: The calculation of WACC involves calculating the weighted average of the required rates of return on…

A: WACC stands for "Weighted Average Cost of Capital." WACC is a financial metric that represents the…

Q: ive typing answer with explanation and conclusion Fama's Llamas has a weighted average cost of…

A: Weighted average cost of capital is total cost of financing the capital of the company. It includes…

Q: PT XYZ is a garment company that produces batik and other traditional clothing. The company's…

A: Calculations are done in excel so there is no intermediate rounding. Value of Unlevered Company (VU)…

Q: Help me

A: Explanation of Return on Asset:Return on Assets (ROA) measures a company's ability to generate…

Q: Clifford, Inc., has a target debt-equity ratio of .80. Its WACC is 9.1 percent, and the tax rate is…

A: WACC is a weighted average cost of all the sources of capital. It is equal to the sum of products of…

Q: A firm has a debt-equity ratio of .52, a pretax cost of debt of 6.5 percent, and a required return…

A: Cost of Equity is also known KE. It is the cost which is incurred by the company for taking the…

Q: What proportion of a firm is equity financed if the WACC is 14%, the after-tax cost of debt is 7.0%,…

A: We will use the below formula to calculate the weight of equity WACC = (Rd*D)+(Re*E)WhereWACC -…

Q: Take It All Away has a cost of equity of 10.57 percent, a pretax cost of debt of 5.29 percent, and a…

A: After tax cost of debt = Pretax cost of debt * (1 - tax rate)= 5.29%*(1-21%)= 4.1791%

Q: Kountry Kitchen has a cost of equity of 12.5 percent, a pretax cost of debt of 5.8 percent, and the…

A: Cost of equity, Ke = 125%,Pretax cost of debt, Kd = 5.8%Tax rate, T = 35%WACC = 9.16%Let's assume…

Q: Take It All Away has a cost of equity of 11.05 percent, a pretax cost of debt of 5.40 percent, and a…

Q: Using the DuPont method, evaluate the effects of the following relationships for the Butters…

A: DuPont analysis is a method of breaking down a company's return on equity (ROE) into three…

Q: what is the weighted average cost of capital?

A: Information Provided: Cost of equity = 12.8% YTM on bonds = 5.3% Tax rate = 35% Debt-Equity ratio =…

Q: WACC Kose, Inc., has a target debt- equity ratio of .65. Its WACC is 11.2 percent, and the tax rate…

A: The cost of debt and the cost of equity constitute the dual components of a firm's capital, employed…

Q: wild flowers express has a debt equity ratio of .60. the pre tax cost of debt is 9% while the…

A: Computation of levered equity cost:Hence, the levered equity cost is 15.98%.

Q: Gamma Inc. has a weighted average cost of capital of 18.60%. The firm’s cost of equity is 24.40%,…

A: WACC = 18.60% Cost of Equity = 24.40% Cost of Debt = 15% Tax Rate = 34%

Q: The Tree House has a pretax cost of debt of 6.1 percent and a return on assets of 10.4 percent. The…

A: Cost of equity is the cost of raising new finance by way of a new equity issue. It is the cost of…

Q: A firm has a cost of debt of 6.6 percent and a cost of equity of 12.1 percent. The debt-equity ratio…

A: Solution:Weighted Average Cost of Capital (WACC) means the average cost of capital for the firm…

Q: Suppose PayPal (PYPL) has no debt and an equity cost of capital of 9%. The average debt-to-value…

A: Cost of Equity: In finance, the cost of equity is the rate of return required by a firm for a…

Question

Definition Definition Amount of return a company generally pays to its equity investors. The cost of equity represents the compensation required by the market in lieu of owning the asset firm and simultaneously bearing the risk of ownership.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

A business has a cost of equity of 9.5 percent and a pretax cost of debt of 5.4 percent. The debt - equity ratio is 1.55 and the tax rate is 25 percent. What is the unlevered cost of capital?
The Tailgate Store has a cost of equity of 8.6 percent. The company has an after-tax cost of debt of 4.5 percent, and the tax rate is 39 percent. If the company's debt-equity ratio is .65, what is the weighted average cost of capital? 8.85% 9.10% 6.55% 7.15% 6.98%
The Two Dollar Store has a cost of equity of 12.8 percent, the YTM on the company's bonds is 5.3 percent, and the tax rate is 35 percent. If the company's debt–equity ratio is .63, what is the weighted average cost of capital? Multiple Choice 7.86% 9.18% 7.06% 8.57% 9.80%
Keziah Textiles, Inc. has a cost of equity of 10.8 percent. The company has an aftertax cost of debt of 5.1 percent, and the tax rate is 35 percent. If the company's debt–equity ratio is .80, what is the weighted average cost of capital?
A firm has a return on assets of 7.8 percent and a cost of equity of 11.9 percent. What is the pretax cost of debt if the debt–equity ratio is .72? Ignore taxes.
Gamma Inc. has a weighted average cost of capital of 18.60%. The firm’s cost of equity is 24.40%, and it’s cost of debt is 15%. The tax rate is 34%. What is Gamma’s debt-to-equity ratio?
Fama's Llamas has a weighted average cost of capital of 9.7 percent. The company's cost of equity is 12 percent, and its pretax cost of debt is 7.4 percent. The tax rate is 25 percent. What is the company's target debt-equity ratio?
The Two Dollar Store has a cost of equity of 11.8 percent, the YTM on the company's bonds is 6.3 percent, and the tax rate is 39 percent. If the company's debt-equity ratio a 53, what is the weighted average cost of capital A)8.58% B) 6.60% C)9.65% D) 9.04% E) 7.85%
The Bigelow Company has a cost of equity of 12 percent, a pre-tax cost of debt of 7 percent, and a tax rate of 35 percent. What is the firmâ€™s weighted average cost of capital if the proportion of debt is 37.5% and the proportion of equity is 62.5%?
Fama's Llamas has a weighted average cost of capital of 9.3 percent. The company's cost of equity is 12.9 percent, and its cost of debt is 7.5 percent. The tax rate is 23 percent. What is the company's debt-equity ratio? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.) Debt-equity ratio
Please give me answer general accounting
Kountry Kitchen has a cost of equity of 12.7 percent, a pretax cost of debt of 5.6 percent, and the tax rate is 21 percent. If the company's WACC is 9.22 percent, what is its debt-equity ratio?