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Using Weighted Average Cost of Capital (WACC), ignoring taxes, compute the cost of capital of a company with debt ratio of 0.75:1 and is paying yearly average interest for its loans of 4% and dividend rate of 5% yearly. a. 4.00% b. 4.25% C. 4.50% d. 5.00%

Using Weighted Average Cost of Capital (WACC), ignoring taxes, compute the cost of capital of a company with debt ratio of 0.75:1 and is paying yearly average interest for its loans of 4% and dividend rate of 5% yearly. a. 4.00% b. 4.25% C. 4.50% d. 5.00%

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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4G 4G 0.70 4G1 54 i i 7:29 VA KB/s pdf-valuation-and-.ssed_compress.pdf - Read-only 99 VALUATION CONCEPTS AND METHODOLOGIES decided to sell the company for P1 Billion. Compute for the Economic Value Added (EVA). a. Php 37,500,000.00 b. Php 50,000,000.00 C. Php 0.00 d. Php 25,000,000.00 8. Using Weighted Average Cost of Capital (WACC), ignoring taxes, compute the cost of capital of a company with debt ratio of 0.75:1 and is paying yearly average interest for its loans of 4% and dividend rate of 5% yearly. a. 4.00% b. 4.25% С. 4.50% d. 5.00% 9. Using Capital Asset Pricing Method (CAPM), compute for the cost of capital (equity) with risk-free rate of 5%, market return of 12% and Beta of 1.3. a. 14.01% b. 14.10% С. 14.00% d. 14.11% 10. Using Capital Asset Pricing Method (CAPM), compute for the cost of capital (equity) with risk-free rate of 4%, market return of 8% and Beta of 1.5. a. 10.00% b. 11.00% C. 12.00% d. 13.00% 11. With risk-free rate of 5%, Beta of 1.5, market return of 8%, prevailing credit spread of 3%, tax rate of 30% and Equity ratio of 30%, compute for the weighted average cost of capital. a. 6.00% b. 6.77% c. 7.00% d. 7.77% 12. With risk-free rate of 6%, Beta of 1.5, market return of 8%, prevailing credit spread of 3%, tax rate of 30% and Equity ratio of 30%, Using CAPM method compute for the cost of equity. 100 VALUATION CONCEPTS AND METHODOLOGIES а. 9.00% 6 77% 103 of 218 С. 8.00% d. 8.77% 13 The annmnriate NAĆC of a firm is 6 43% With risk-free rate of 4%.
Transcribed Image Text:4G 4G 0.70 4G1 54 i i 7:29 VA KB/s pdf-valuation-and-.ssed_compress.pdf - Read-only 99 VALUATION CONCEPTS AND METHODOLOGIES decided to sell the company for P1 Billion. Compute for the Economic Value Added (EVA). a. Php 37,500,000.00 b. Php 50,000,000.00 C. Php 0.00 d. Php 25,000,000.00 8. Using Weighted Average Cost of Capital (WACC), ignoring taxes, compute the cost of capital of a company with debt ratio of 0.75:1 and is paying yearly average interest for its loans of 4% and dividend rate of 5% yearly. a. 4.00% b. 4.25% С. 4.50% d. 5.00% 9. Using Capital Asset Pricing Method (CAPM), compute for the cost of capital (equity) with risk-free rate of 5%, market return of 12% and Beta of 1.3. a. 14.01% b. 14.10% С. 14.00% d. 14.11% 10. Using Capital Asset Pricing Method (CAPM), compute for the cost of capital (equity) with risk-free rate of 4%, market return of 8% and Beta of 1.5. a. 10.00% b. 11.00% C. 12.00% d. 13.00% 11. With risk-free rate of 5%, Beta of 1.5, market return of 8%, prevailing credit spread of 3%, tax rate of 30% and Equity ratio of 30%, compute for the weighted average cost of capital. a. 6.00% b. 6.77% c. 7.00% d. 7.77% 12. With risk-free rate of 6%, Beta of 1.5, market return of 8%, prevailing credit spread of 3%, tax rate of 30% and Equity ratio of 30%, Using CAPM method compute for the cost of equity. 100 VALUATION CONCEPTS AND METHODOLOGIES а. 9.00% 6 77% 103 of 218 С. 8.00% d. 8.77% 13 The annmnriate NAĆC of a firm is 6 43% With risk-free rate of 4%.
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