Unlevered Cost of Equity Elliott's Cross Country Transportation Services has a capital structure with 30% debt at a 7% interest rate. Its beta is 1.7, the risk-free rate is 3%, and the market risk premium is 8%. Elliott's combined federal-plus-state tax rate is 25%. a. What is Elliott's cost of equity? Do not round intermediate calculations. Round your answer to two decimal places. 8.1 % b. What is its weighted average cost of capital? Do not round intermediate calculations. Round your answer to two decimal places. 6.98 % c. What is its unlevered cost of equity? Do not round intermediate calculations. Round your answer to two decimal places. % Hide Feedback Incorrect

Unlevered Cost of Equity Elliott's Cross Country Transportation Services has a capital structure with 30% debt at a 7% interest rate. Its beta is 1.7, the risk-free rate is 3%, and the market risk premium is 8%. Elliott's combined federal-plus-state tax rate is 25%. a. What is Elliott's cost of equity? Do not round intermediate calculations. Round your answer to two decimal places. 8.1 % b. What is its weighted average cost of capital? Do not round intermediate calculations. Round your answer to two decimal places. 6.98 % c. What is its unlevered cost of equity? Do not round intermediate calculations. Round your answer to two decimal places. % Hide Feedback Incorrect

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter7: Types And Costs Of Financial Capital

Section: Chapter Questions

Problem 11EP

See similar textbooks

Similar questions

Please please answer that full answer please
Plz Use excel !!! and show formula A company currently has a WACC of 10.6 percent and no debt. The tax rate is 21 percent. a. What is the company’s current cost of equity? b. If the firm converts to 40 percent debt with a cost of 6%, what will its cost of equity be? And the WACC? c. If the firm converts to 60 percent debt with a cost of 6% , what will its cost of equity be? And the WACC? d. What can you conclude from the values of the cost of equity and WACC obtained in b. and c.
Need help with both questions
Can you show me using excel calculations please?
5 Gaucho Services starts life with all-equity financing and a cost of equity of 13%. Suppose it refinances to the following market-value capital structure: 10 points eBook Debt (D) Equity (E) 41% 59% at D = 10.4% a. Use MM's proposition 2 to calculate the new cost of equity. Gaucho pays taxes at a marginal rate of T = 35%. b. Calculate Gaucho's after-tax weighted-average cost of capital. Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Print a. Return on equity References b. After-tax WACC % %
Give typed solution only
F1
Reconsider Examples 11.7 and 11.8. The marginal income-tax rate (tm) for Capstone is expected to remain at 40% in the future. Assuming that Capstone's capital structure (debt ratio) also remains unchanged in the future, determine the cost of capital (k) of raising $55 million in addition to Capstone's existing capital.
Manshukh
ont question Kose, Inc., has a target debt-equity ratio of 1.63. Its WACC is 7.4 percent, and the tax rate is 25 percent. Required: If the company's cost of equity is 15 percent, what is its pretax cost of debt? (Do not round Intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 3216.) a. b. If instead you know that the aftertax cost of debt is 5.6 percent, what is the cost of equity? (Do not round Intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 3216.)
12 Gates Appliances has a return-on-assets (investment) ratio of 20 percent. a. If the debt-to-total-assets ratio is 25 percent, what is the return on equity? (Input your answer as a percent rounded to 2 decimal places.) Return on equity % b. If the firm had no debt, what would the return-on-equity ratio be? (Input your answer as a percent rounded to 2 decimal places.) Return on equity
Reactive Power Generation has the following capital structure. Its corporate tax rate is 21%. Required Rate of Return 4% 6 10 Security Debt Preferred stock Common stock Market Value $ 30 million 30 million 40 million What is its WACC? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. WACC Answer is complete but not entirely correct. 7.29%