With APV model, the company should discount operating cash flows at: Cost of debt=6% O Cost of capital=8.74% O All-equity cost of capital-12% Cost of equity=27.84%
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Am. 112.
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- What is its free cash flow to equity? Do not round intermediate calculations. Round your answer to the nearest cent.If a bank has a leverage ratio of 0.5 and a return on assets of 1%, what is its return on equity? Select one: OA 0.2% O B. 2% OC 5% O D. 20%K-Life financial services Limited uses risk-adjusted return on capital (RAROC) to measure performance on several aspects. In this regard, imagine that an investment officer wants to execute a transaction with the following characteristics: Probability of default (PD) = 30 basis points Loss given default (LGD) = 55% Exposure at default (EAD) = K 1.45 million Expected loss (EL) = K 2,750 This is a loan to a company in the Agro industrial. The firm’s economic capital (EC) model is based on the 99% confidence level, with an average standard deviation of 2.15%. The risk-free rate of return is 6%. Assume that the bank has set a RAROC hurdle rate of 15% and this transaction has a net profit of K10, 500. REQUIRED: Compute the K-life’s risk-adjusted rate of return on this transaction. Now assume that K-life could also have made a loan for the same amount to a firm in the service industry, and that the standard deviation for economic capital purposes in this case is 1.29%. Compute the bank’s…
- Need answer please13. 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) 4.5% d) 5.00% 14. 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% c) 14.00% d) 14.11% 15. 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%Assume that your company is trying to determine its optimal capital structure, which consists only of debt and common stock. To estimate the cost of debt, the company has produced the following table: 09.86% 9.56% Percent Financed With Debt 10.16% 8.96% 9.26% 0.10 0.20 0.30 0.40 0.50 Percent Financed With Equity 0.90 0.80 0.70 0.60 0.50 Debt/Equity Ratio Now assume that the company's tax rate is 40 percent, that the company uses the CAPM to estimate its cost of common equity, Ks, that the risk-free rate is 5 percent and the market risk premium is 6 percent. Finally assume that if it has no debt its WACC would be equal to its cost of equity which would be equal to 11 percent (you should now be able to determine its "unlevered beta," bu). 0.10/0.90 0.11 0.20/0.80 0.25 Given this information, determine the firm's cost of capital if it finances with 40 percent debt and 60 percent equity. 0.30/0.70=0.43 0.40/0.600.67 0.50/0.50 = 1.00 Bond Rating AA A A BB B Before-Tax Cost of Debt 7.0% 7.2%…
- Given cash flows for Concatenator Manufacturing Division, calculate PV of near- term cash flows, PV (horizon value), and total value of firm; r = 10% and g = 6% 1 2 3 4 5 6 7 8 9 10 Asset value 10.00 11.20 12.54 14.05 15.31 16.69 18.19 19.29 20.44 21.67 Earnings 1.20 1.34 1.51 1.69 1.84 2.00 2.18 2.31 2.45 2.60 Net investment 1.20 1.34 1.51 1.26 1.38 1.50 1.09 1.16 1.23 1.30 Free cash flow (FCF) 0.00 0.00 0.00 0.42 0.46 0.50 1.09 1.16 1.23 1.30 Return on equity (ROE) 0.12 0.12 0.12 0.12 0.12 0.12 0.12 0.12 0.12 0.12 Asset growth rate 0.12 0.12 0.12 0.09 0.09 0.09 0.06 0.06 0.06 Earnings growth rate 0.12 0.12 0.12 0.09 0.09 0.09 0.06 0.06 0.06 4-30Bank ABC has a Return on Equity (ROE) equal to 22%, a total assets/debt ratio equal to 1.02 and an asset utilisation ratio equal to 0.02. From this we know that the profit margin of bank ABC is:Please answer the question
- Please give correct solutionBelow you will find the operating cash flows (Free Cash Flow) for ABC Corp. The company has a 11% weighted average cost of capital. Assuming that you are using an exit multiple approach to analyze ABC Corp, what is the Enterprise Value using an exit multiple of 7 (EV/EBITDA = 7x)? Dollars in millions Sales -Cash COGS and SG&A EBITDA -Tax basis D&A Operating Income -Taxes Net Operating Profit After Taxes +Depreciation & Amortization -Capex for PP&E -Working Capital Changes Operating Cash Flow Cost of Capital Present Value of Cash Flows $879.16 million $921.69 million $904.77 million $924.61 million 2023 500 400 100 14.1 85.9 21.48 64.43 14.1 17.2 2.2 59.13 Projected FYE 12/31 2024 560 448 112 16.2 95.8 23.95 71.85 16.2 19.26 2.46 66.32 2025 627.2 501.76 125.44 18.4 107.04 26.76 80.28 18.4 21.58 2.76 74.34 2026 702.46 561.97 140.49 20.6 119.89 29.97 89.92 20.6 24.16 3.09 83.26 2027 786.76 629.41 157.35 18.4 138.95 34.74 104.21 18.4 27.06 3.46 92.09Show solution
