EBK CORPORATE FINANCE
EBK CORPORATE FINANCE
4th Edition
ISBN: 9780134202785
Author: DeMarzo
Publisher: VST
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Chapter 15, Problem 13P

NatNah, a builder of acoustic accessories, has no debt and an equity cost of capital of 15%. Suppose NatNah decides to increase its leverage and maintain a market debt-to-value ratio of 0.5. Suppose its debt cost of capital is 9% and its corporate tax rate is 35%. If NatNah’s pretax WACC remains constant, what will its (effective after-tax) WACC be with the increase in leverage?

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Assume an investor buys a share of stock for $18 at t = 0 and at the end of the next year (t = 1) , he buys 12 shares with a unit price of $9 per share. At the end of Year 2 (t = 2) , the investor sells all shares for $40 per share. At the end of each year in the holding period, the stock paid a $5.00 per share dividend. What is the annual time-weighted rate of return?
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EBK CORPORATE FINANCE

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Financial leverage explained; Author: The Finance story teller;https://www.youtube.com/watch?v=GESzfA9odgE;License: Standard YouTube License, CC-BY