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

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter12: The Cost Of Capital

Section: Chapter Questions

Problem 7P

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Help Save & Exit Submit Wentworth's Five and Dime Store has a cost of equity of 11.9 percent. The company has an aftertax cost of debt of 5.2 percent, and the tax rate is 40 percent. If the company's debt-equity ratio is .79, what is the weighted average cost of capital? Multiple Choice 6.99% 8,03% 8.94% 7.57% 6.94% 12 of 40 Ne > ( Prev
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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.
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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: Debt (D) Equity (8) 418 at p = 8.6% 59% a. Use MM's proposition 2 to calculate the new cost of equity. Gaucho pays taxes at a marginal rate of To 30%. 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. a. Return on equity b. After-tax WACC %
Question: Fama's Llamas has a weighted average cost of capital of 9.5%. The company's cost of equity is 11%, and its cost of debt is 7.5%. The tax rate is 40%. 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.)
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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 % %
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