Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
4th Edition
ISBN: 9780134083278
Author: Jonathan Berk, Peter DeMarzo
Publisher: PEARSON
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Textbook Question
Chapter 15, Problem 12P
Summit Builders has a market debt-equity ratio of 0.65 and a corporate tax rate of 40%, and it pays 7% interest on its debt. The interest tax shield from its debt lowers Summit's WACC by what amount?
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Malabar Gold has taken a loan of two million on which it pays an interest of 5.5 % . If the current tax rate 34.5 % . What is the firm's after tax cost of debt ? Select one a . 5.44 b . 3.60 C. 4.42 D. None of these
Clifford, Inc., has a target debt-equity ratio of .80. Its WACC is 9.1 percent, and the tax
rate is 25 percent.
a. If the company's cost of equity is 13 percent, what is its pretax cost of debt? (Do not
round intermediate calculations and enter your answer as a percent rounded to 2
decimal places, e.g., 32.16.)
b. If instead you know that the aftertax cost of debt is 5.8 percent, what is the cost of
equity? (Do not round intermediate calculations and enter your answer as a percent
rounded to 2 decimal places, e.g., 32.16.)
a.
Cost of debt
%
b.
Cost of equity
%
Malbar Gold has taken a loan of two million
on which it pays an interest of 4.5 %. If the
current tax rate 37.5 %. What is the firm's
after tax cost of debt?
Select one:
a. None of these
О Б. 3.44
O c. 4.42
O d. 2.81
Chapter 15 Solutions
Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
Ch. 15.1 - With corporate income taxes, explain why a firms...Ch. 15.1 - Prob. 2CCCh. 15.2 - With corporate taxes as the only market...Ch. 15.2 - How does leverage affect a firms weighted average...Ch. 15.3 - How can shareholders benefit from a leveraged...Ch. 15.3 - How does the interest tax shield enter into the...Ch. 15.4 - Prob. 1CCCh. 15.4 - How does this personal tax disadvantage of debt...Ch. 15.5 - How does the growth rate of a firm affect the...Ch. 15.5 - Do firms choose capital structures that fully...
Ch. 15 - Prob. 1PCh. 15 - Grommit Engineering expects to have net income...Ch. 15 - Suppose the corporate tax rate is 40%. Consider a...Ch. 15 - Braxton Enterprises currently has debt outstanding...Ch. 15 - Your firm currently has 100 million in debt...Ch. 15 - Arnell Industries has just issued 10 million in...Ch. 15 - Prob. 7PCh. 15 - Prob. 8PCh. 15 - Safeco Inc. has no debt, and maintains a policy of...Ch. 15 - Rogot Instruments makes fine violins and cellos....Ch. 15 - Rumolt Motors has 30 million shares outstanding...Ch. 15 - Summit Builders has a market debt-equity ratio of...Ch. 15 - NatNah, a builder of acoustic accessories, has no...Ch. 15 - Restex maintains a debt-equity ratio of 0.85, and...Ch. 15 - Acme Storage has a market capitalization of 100...Ch. 15 - Milton Industries expects free cash flow of 5...Ch. 15 - Prob. 17PCh. 15 - Kurz Manufacturing is currently an all-equity firm...Ch. 15 - Rally, Inc., is an all-equity firm with assets...Ch. 15 - Prob. 20PCh. 15 - Facebook, Inc. had no debt on its balance sheet in...Ch. 15 - Markum Enterprises is considering permanently...Ch. 15 - Garnet Corporation is considering issuing...Ch. 15 - Suppose the tax rate on interest income is 35%,...Ch. 15 - With its current leverage, Impi Corporation will...Ch. 15 - Colt Systems will have EBIT this coming year of 15...Ch. 15 - PMF, Inc., is equally likely to have EBIT this...
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