Provide solution for these financial accounting question XYZ Inc. has a debt to equity ratio of 0.5,$20 000 of debt with an interest rate of5%, 10 000 shares outstanding, a 10%expected returns on assets, and a 30% taxrate. Assuming a constant amount ofdebt, compute the expected return ofequity.

Given:Debt to equity ratio (D/E) = 0.5Debt (D) = $20,000Interest rate on debt (Rd) = 5%Expected…

Answered: XYZ Inc. has a debt to equity ratio of…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter13: Capital Structure Concepts

Section: Chapter Questions

Problem 6P

See similar textbooks

Similar questions

Calculate
Gates Appliances has a return-on-assets (investment) ratio of 20 percent. a. If the debt-to-total-assets ratio is 25 percent, what is the return on equity? (Input your answer as a percent rounded to 2 decima) places.) b. If the firm had no debt, what would the return-on-equity ratio be? (Input your answer as a percent rounded to 2 decimal places.)
Need help accounting
Using the DuPont method, evaluate the effects of the following relationships for the Butters Corporation. A.Butters Corporation has a profit margin of 5.5 percent and its return on assets (investment) is 8.75 percent. What is its assets turnover? Round your answer to 2 decimal places. ______ times B.If the Butters Corporation has a debt-to-total-assets ratio of 65.00 percent, what would the firm’s return on equity be? Note: Input your answer as a percent rounded to 2 decimal places. C.What would happen to return on equity if the debt-to-total-assets ratio decreased to 60.00 percent? Input your answer as a percent rounded to 2 decimal places.
What is the value of equity and debt?
A firm has an ROE of 3%, a debt-to-equity ratio of .5, and a tax rate of 35% and pays an interest rate of 6% on its debt. What is its operating ROA?
ROA?
Percentages need to be entered in decimal format, for instance 3% would be entered as .03. Ezzell Enterprises has the following capital structure, which it considers to be optimal under present and forecasted conditions: Debt (long-term only) ratio - 45% Common equity - 55% Total liabilities and equity - 100% For the coming year, management expects after-tax earning of $2.5 million. Ezzell's past dividend policy of paying out 60% of earnings will continue. Present commitments from its bankers will allow Ezzell to borrow according to the following schedule: Loan Amount Interest Rate $1 to $500,000 9% on this increment of debt $500,001 to $900,000 11% on this increment of debt $900,001 and above 13% on this increment of debt The company's marginal tax rate is 40%, the current market price of its stock is $22 per share, its last dividend was $2.20 per share, and the expected growth rate is 5%. External equity (new common) can be sold at a flotation cost of 10%.…
a firm has a debt-to-equity ratio of 1.0. if we assume that the firm's debt pays 11% interest annualy, the equity has a 19% annual return, and the tax rate is 40%, then what is the firms WACC?
A firm had a debt ratio of 0.85. The pretax cost of debt is 8% and the reqiured return on asset is 15.5%. What is the cost of equity if we factorin the firms tax rate of 24%? A) 19.53 B) 18.92 C) 21.57 D) 20.35 E) 20.96
A company finances its operations with 57 percent debt and the rest using equity. The annual yield on the company's debt is 6% and the required rate of return on the stock is 14.6%. What is company's WACC? Assume the tax rate is 30%
Caddy manufacturing has a target debt equity ratio of .45. Its cost of equity is 10.3%, and its pre- tax cost of debt is 6.4%. If the tax rate is 21%, what is the company's WACC ? Pls type in computer! Thanks

SEE MORE QUESTIONS

Recommended textbooks for you

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

SEE MORE TEXTBOOKS

XYZ Inc. has a debt to equity ratio of 0.5, $20 000 of debt with an interest rate of 5%, 10 000 shares outstanding, a 10% expected returns on assets, and a 30% tax rate. Assuming a constant amount of debt, compute the expected return of equity.