The expected return of the stock. Introduction: Expected Return is the method of finding the average anticipated probability of several diverse interest rates that are probable on a particular asset. The issues in such persistence comprise of dissimilar market environments that also include the beta of an asset.

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Answer 1

Question

Chapter 14, Problem 14P

a.

Summary Introduction

To determine: The expected return of the stock.

Introduction:

Expected Return is the method of finding the average anticipated probability of several diverse interest rates that are probable on a particular asset. The issues in such persistence comprise of dissimilar market environments that also include the beta of an asset.

b.

Summary Introduction

To determine: (i) The expected return of the stock if risk of the debt does not change. (ii) Whether the expected return of the stock is higher or lower than part (i) if the debt increase.

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A. Suppose that Taco John’s equity is currently selling for $55 per share, with 4million shares outstanding. If the firm also has 17 thousand bonds outstanding,which are selling at 94 percent of par, what are the firm’s current capital structure weights? Use the capital structure weights equation:B. Suppose that Taco John’s is considering an active change to their capital structure so as to have a D/E of 0.4, which type of security (stocks or bonds) would they need to sell to accomplish this, and how much would they have to sell?

Indell stock has a current market value of $160 million and a beta of 1.50. Indell currently has risk-free debt as well. The firm decides to change its capital structure by issuing $69.34 million in additional risk-free debt, and then using this $69.34 million plus another $9 million in cash to repurchase stock. With perfect capital markets, what will the beta of Indell stock be after this transaction? The beta of Indell stock after the recapitalization is (Round to two decimal places.)

Indell stock has a current market value of $130 million and a beta of 1.50. Indell currently has risk-free debt as well. The firm decides to change its capital structure by issuing $27.79 million in additional risk-free debt, and then using this $27.79 million plus another $17 million in cash to repurchase stock. With perfect capital markets, what will the beta of Indell stock be after this transaction? The beta of Indell stock after the recapitalization is www (Round to two decimal places.)

Answer 2

Question

Chapter 14, Problem 14P

a.

Summary Introduction

To determine: The expected return of the stock.

Introduction:

Expected Return is the method of finding the average anticipated probability of several diverse interest rates that are probable on a particular asset. The issues in such persistence comprise of dissimilar market environments that also include the beta of an asset.

b.

Summary Introduction

To determine: (i) The expected return of the stock if risk of the debt does not change. (ii) Whether the expected return of the stock is higher or lower than part (i) if the debt increase.

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Answer 3

Question

Chapter 14, Problem 14P

a.

Summary Introduction

To determine: The expected return of the stock.

Introduction:

Expected Return is the method of finding the average anticipated probability of several diverse interest rates that are probable on a particular asset. The issues in such persistence comprise of dissimilar market environments that also include the beta of an asset.

b.

Summary Introduction

To determine: (i) The expected return of the stock if risk of the debt does not change. (ii) Whether the expected return of the stock is higher or lower than part (i) if the debt increase.

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Answer 4

Question

Chapter 14, Problem 14P

a.

Summary Introduction

To determine: The expected return of the stock.

Introduction:

Expected Return is the method of finding the average anticipated probability of several diverse interest rates that are probable on a particular asset. The issues in such persistence comprise of dissimilar market environments that also include the beta of an asset.

b.

Summary Introduction

To determine: (i) The expected return of the stock if risk of the debt does not change. (ii) Whether the expected return of the stock is higher or lower than part (i) if the debt increase.

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Answer 5

Chapter 14, Problem 14P

a.

Summary Introduction

To determine: The expected return of the stock.

Introduction:

Expected Return is the method of finding the average anticipated probability of several diverse interest rates that are probable on a particular asset. The issues in such persistence comprise of dissimilar market environments that also include the beta of an asset.

b.

Summary Introduction

To determine: (i) The expected return of the stock if risk of the debt does not change. (ii) Whether the expected return of the stock is higher or lower than part (i) if the debt increase.

Answer 6

Chapter 14, Problem 14P

a.

Summary Introduction

To determine: The expected return of the stock.

Introduction:

Expected Return is the method of finding the average anticipated probability of several diverse interest rates that are probable on a particular asset. The issues in such persistence comprise of dissimilar market environments that also include the beta of an asset.

Answer 7

Chapter 14, Problem 14P

a.

Summary Introduction

To determine: The expected return of the stock.

Introduction:

Expected Return is the method of finding the average anticipated probability of several diverse interest rates that are probable on a particular asset. The issues in such persistence comprise of dissimilar market environments that also include the beta of an asset.

Answer 8

b.

Summary Introduction

To determine: (i) The expected return of the stock if risk of the debt does not change. (ii) Whether the expected return of the stock is higher or lower than part (i) if the debt increase.

Answer 9

b.

Summary Introduction

To determine: (i) The expected return of the stock if risk of the debt does not change. (ii) Whether the expected return of the stock is higher or lower than part (i) if the debt increase.

Answer 10

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Answer 11

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Answer 12

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Answer 13

Ch. 14.1 - How does the risk and cost of capital of levered...Ch. 14.2 - Why are investors indifferent to the firms capital...Ch. 14.2 - What is a market value balance sheet?Ch. 14.2 - In a perfect capital market, how will a firms...Ch. 14.3 - How do we compute the weighted average cost of...Ch. 14.3 - With perfect capital markets, as a firm increases...Ch. 14.4 - If a change in leverage raises a firm's earnings...Ch. 14.4 - True or False: When a firm issues equity, it...Ch. 14.5 - Consider the questions facing Dan Harris, CFO of...Ch. 14.5 - Prob. 2CC

Solution Summary: The author explains that expected return is the method of finding the average anticipated probability of several diverse interest rates that are probable on a particular asset.

To determine: (i) The expected return of the stock if risk of the debt does not change. (ii) Whether the expected return of the stock is higher or lower than part (i) if the debt increase.

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Chapter 14 Solutions