VF Company has a beta of 1.45. The current return on the stock market is estimated at 11.5% and the risk-free rate is 3.5%. Its before-tax cost of debt is 7% and its marginal taxrate is 30%. Use the data from this balance sheet to answer the following problems:AssetsCashLiabilities & EquityLong-Term Debt2506,423Accounts Rec.850Common StockEquity1,387Inventories2,277Net FixedAssets4,433Total Assets7,810Total Liab. & Equity7,810Calculate the percent of common equity for VF Company.0%82.24%17.76%X56.76%26.53%

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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

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You are analysis Sasol stock and you have gathered the information in the table below. If the net debt of the firm increased by R20 million, what is the approximate FCFE? FCFF Interest after tax Tax rate FCFE growth Cost of equity R198m R15m 35% 3% 14% R1,950 R2,497 R203 R188.25 R208.25
Ginger Industries stock has a beta of 1.33. The company just paid a dividend of $.83, and the dividends are expected to grow at 5.3 percent. The expected return on the market is 11.8 percent, and Treasury bills are yielding 5.3 percent. The most recent stock price is $83.00. Calculate the cost of equity using the dividend growth model method. Calculate the cost of equity using the SML method.
Compute the WACC of a firm that currently has $1 million in debt and $2 million in equity and $1 million in preferred stock. The current yield to maturity on the firms debt is 2%. Equity holders require a 6% return and preferred stock holders require a 3.8% return. The current tax rate that applies to the firm is 30%. Write your answer as a decimal.
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Consider a simple firm that has the following market-value balance sheet: Assets Liabilities end equity $1 040 Debt Equity $400 640 Next year, there are two possible values for its assets, each equally likely: $1 180 and $960. Its debt will be due with 4.9% interest. Because all of the cash flows from the assets must go to either the debt or the equity, if you hold a portfolio of the debt and equity in the same proportions as the firm's capital structure, your portfolio should earn exactly the expected return on the firm's assets. Show that a portfolio invested 38% in the firm's debt and 62% in its equity will have the same expected return as the assets of the firm. That is, show that the firm's pre-tax WACC is the same as the expected return on its assets. If the assets will be worth $1 180 in one year, the expected return on assets will be %. (Round to one decimal place.)
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Answer the following questions given the information below: Equity Information 40 million shares $100 per share Beta = 1.15 Market risk premium = 8% Risk-free rate = 3% Debt Information $1 billion in outstanding debt (face value) YTM = 9% What is the cost of equity? What is the cost of debt? What is the after-tax cost of debt? What are the capital structure weights? What is the WACC?
Here is some information about Stokenchurch Incorporated: Beta of common stock = 2.0 Treasury bill rate=4% Market risk premium = 8.3% Yield to maturity on long-term debt = 6% Book value of equity = $520 million Market value of equity = $1,040 million Long-term debt outstanding = $1,040 million. Corporate tax rate = 21% What is the company's WACC? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. WACC %
The assets of company X have a beta equal to 1. Assume that the company's debt has a beta equal to 0.5 and that X's equity has a beta equal to 2. Consider an investor who holds 10% of the company's total debt liabilities and 10% of the company's equity. The beta of the investor's portfolio is equal to A) 0.1 B)1 C) 0.25 D) 1.25

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