What is the WACC for a firm using 65% equity with a required return of 15%; 35% debt with a YTM of 8%, and a tax rate of 35%? Question 20 options: A.10.72% B. 11.07% C. 12.55% D. 11.57
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What is the WACC for a firm using 65% equity with a required return of 15%; 35% debt with a YTM of 8%, and a tax rate of 35%?
Question 20 options:
A.10.72%
B. 11.07%
C. 12.55%
D. 11.57%
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- which one is correct please confirm? QUESTION 5 Heleveton Industries is 100% equity financed. Its current beta is 1.1. The expected market risk premium is 8.5%, and the risk-free rate is 4.2%. If Heleveton changes its capital structure to 25% debt, it estimates its beta will increase to 1.2. If the after-tax cost of debt will be 6%, should Heleveton make the capital structure change? a. Yes, cost of capital decreases 1.67% b. No, cost of capital increases by 0.85% c. Yes, cost of capital decreases by 2.52% d. No, stock price would decrease due to increased riskWhich of the following capital structures is optimal? Debt Equity EPS Stock Price 40% 60% $2.95 $26.50 50% 50% $3.05 $28.90 60% 40% $3.18 $31.20 70% 30% $3.31 $30.00 80% 20% $3.42 $30.40 Question 1 options: 40% debt 50% debt 60% debt 70% debt 80% debtIf Net Worth = 14, the Market Value of Assets = 250 with duration of 8.0, the Market Value of Liabilities = 200 with duration of 3.0, the calculation for the duration of equity would equal: Group of answer choices C. 1000 B. 100 A. 10 D. 1400
- 14. Foundation Inc. currently has a return on equity (ROE) equal to 24%, a required return on equity (re) equal to 12% and a dividend payout ratio of 60% leading to a forward PE ratio of 25 and a PB ratio of 6. What would be the company's PB ratio if they reduce their dividend payout ratio to 55% in perpetuity? Options a. 9 b. 11 c. 4 d. 6QUESTION 42 company s estimating its optimal capital structure. Now the company has a capital structure that consists of 20% debt and 80% equity, based on market values (debt to equity D/S ratio is 0.25). The risk-free rate (RF) is 5% and the market risk premium (M-[RF) is 6%. Currently the company's cost of equity, which is based on the CAPM, is 14% and its tax rate is 20%. Find the firm's current leveraged beta using the CAPM O 1.0 O 1.5 O 1.6 O 1.7 QUESTION 43 Based on the information from Question 42, find the firm's unleveraged beta using the Hamada Equation O 0.95 O 1.0 O 1.25 O 1.35 QUESTION 44 Based on the information from Question 42 and 43, what would be the company's new leveraged beta if it were to change its capital structure to 50% debt and 50% equity (D/S=1.0) using the Hamada Equation? O 1.25 O 1.35 O 1.95 O 2.25 QUESTION 45 Based on the information from Question 42 ~ 44, what would be the company's new cost of equity if it were to change its capital structure to 50%…QUESTION 18 Suppose that the 1-year, 2-year, 3-year, and 4-year spot rates are observed as follows: r1=9.7%, r2=10.2%, r3=10.9%, r4-12.3%, What must be the expected return in year 4 under the liquidity preference theory if the liquidity premium is 0.49%? Oa. 18.63% Ob. 16.61% c. 16.12% Od. 18.14%
- D Question 7 Given are the following data: Cost of debt ro = 6%; Cost of equity = re = 12.1%; Marginal tax rate - 35%; and the firm has 50 percent debt and 50 percent equity. Calculate the after-tax weighted average cost of capital (WACC). O 7.1 percent 9 percent 8 percent O 5.9 percentFollowing five problems Current Wd Structure Ws Other Factors 1.000 0.700 What is the current beta? 1.600 WACC 0.813 Rf 5% Market Risk Premium 8% 30% 70% 12% Tax rate Tax rate 30% 30%which one is correct answer please confirm? Q 12: Wellington Gas has a target capital structure of 50% common equity, 40% debt, and 10% preferred stock. The cost of retained earnings is 16%, and the cost of new equity (external) is 16.7%. Wellington can sell debentures that will have an after-tax cost of 8.3% and the after-tax cost of preferred stock will be 11.9%. What is the marginal cost of capital before and after the break point? a. 14.23% and 14.68% b. 12.51% and 12.86% c. 11.18% and 11.53% d. 12.51% and 11.53%
- Question 1Firm A’s capital structure contains 20% debt and 80% equity. Firm B’s capital structurecontains 50% debt and 50% equity.Both firms pay 7% annual interest on their debt. Firm A’s shares have a beta of 1.0and Firm B’s beta of 1.375. The risk-free rate of interest equals 4%, and the expectedreturn on the market portfolio equals 12%. RequiredA. Calculate the WACC for each firm assuming there are no taxes.B. Recalculate the WACC figures assuming that the two firms face a marginaltax rate of 34%. What do you conclude about the impact of taxes from yourWACC calculations? C. Explain the simplifying assumptions managers make when using WACC asa project discounting method and discuss some of the common pitfallswhen using WACC in capital budgeting.1 views You have the following initial information on CMR Co. on which to base your calculations and discussion for questions 1) and 2):• Current long-term and target debt-equity ratio = 1:4• Corporate tax rate = 30%• Expected Inflation = 1.75%• Equity beta = 1.6385• Debt beta = 0.2055• Expected market premium (rM – rF) = 6.00%• Risk-free rate (rF) = 2.15% 1) The CEO of CMR Co., for which you are CFO, has requested that you evaluate a potential investment in a new project. The proposed project requires an initial outlay of $7.15 billion. Once completed (1 year from initial outlay) it will provide a real net cash flow of $575 million in perpetuity following its completion. It has the same business risk as CMR Co.’s existing activities and will be funded using the firm’s current target D:E ratio. a) What is the nominal weighted-average cost of capital (WACC) for this project?b) As CFO, do you recommend investment in this project? Justify your answer (numerically). 2) Assume now a…Chapter 12, Question 10b: You need to estimate the equity cost of capital for XYZ Corp. You have the following data available regarding past returns: Year Risk-free Return 2007 3% 2008 1% Market Return XYZ Return 6% 10% -37% -45% Part B Estimate XYZ's beta (Hint: You'd better compute the market's and XYZ's excess returns for each year to proceed) beta = 1.17 beta 1.35 beta = 1.11 Obeta = 1.29
