None You need to estimate the equity cost of capital for XYZ Corp. You have thefollowing data available regarding past returns:YearRisk-free Return20073%20081%Part C Estimate XYZ's historical alpha.3.1%4.6%5.5%4%Market ReturnXYZ Return6%10%-37%-45%wwwww

c. Expected Return of Market =(6%-37%)/2 =-15.50%Expected Return of XYZ =(10%-45%)/2…

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Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter14: Security Structures And Determining Enterprise Values

Section: Chapter Questions

Problem 1hM

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What is the company’s cost of capital? 1. CAPM = rrf + (rm – rrf)B = required rate of return on equityr rf = risk-free rate of return = 10-year Treasury rate = 3% S&P market premium (in parenthesis) is the extra return to cover risk offered in the stock market = 5%. B = Beta of company = 1.2 2. WACC = wdrd(1-t) + were = weighted average cost of capitalWeights of debt and equity: Given debt ratio, that is, debt to total assets = 28%. Cost of debt is bond rating at high end of A average = 6%. Tax rate given 40%.
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tol Processing ng Help Save & Exit Submit Saved Practice Problems i Check my work Eaton Electronic Company's treasurer uses both the capital asset pricing model and the dividend valuation model to compute the cost of common equity (also referred to as the required rate of return for common equity). Assume: Rf = 7% Km 10% = 1.6 D1 = $ 0.70 $ 19 8% %3D PO = nt a. Compute Ki (required rate of return on common equity based on the capital asset pricing model). (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) ences Ki b. Compute Ke (required rate of return on common equity based on the dividend valuation model). (Do not round intermediate calculations, Input vour answer as a percent rounded to 2 decimal places.) < Prev 10 of 10 Next Mc Graw Hill 149 MacBook Air
Understanding the optimal capital structure Review this situation: Universal Exports Inc. is trying to identify its optimal capital structure. Universal Exports Inc. has gathered the following financial information to help with the analysis. Debt Ratio Equity Ratio rdrd rsrs WACC 30% 70% 7.00% 10.50% 8.61% 40% 60% 7.20% 10.80% 8.21% 50% 50% 7.70% 11.40% 8.01% 60% 40% 8.90% 12.20% 8.08% 70% 30% 10.30% 13.50% 8.38% Which capital structure shown in the preceding table is Universal Exports Inc.’s optimal capital structure? Debt ratio = 50%; equity ratio = 50% Debt ratio = 30%; equity ratio = 70% Debt ratio = 60%; equity ratio = 40% Debt ratio = 70%; equity ratio = 30% Debt ratio = 40%; equity ratio = 60%
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help please answer in text form with proper workings and explanation for each and every part and steps with concept and introduction no AI no copy paste remember answer must be in proper format with all working

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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% Part C Estimate XYZ's historical alpha. 3.1% 4.6% 5.5% 4% Market Return XYZ Return 6% 10% -37% -45% wwwww