Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
12th Edition
ISBN: 9781259144387
Author: Richard A Brealey, Stewart C Myers, Franklin Allen
Publisher: McGraw-Hill Education
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Chapter 19, Problem 22PS
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To discuss: Whether the calculation is agreeable by Person X.
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The capital structure of Ridley Enterprises is: Debt 40%, Equity 60%. The cost of debt is 13%, and the cost of equity is 16.5%. What is the weighted average cost of capital for Ridley Enterprises?
a.13.8%
b.15.1%
c.16.2%
d.14.4%
Company X has debt and equity as sources of funds. Company X has market value of debt
as $150,000 and book value of debt as $80,000. The company has book value of equity as
$100,000 and market value of equity as $125,000. The cost of debt is 8.25% and cost of
equity is 9.57%. the tax rate is 38%. What is the Weighted Average Cost of Capital
(WACC)?
a. 7.59%
b. 7.78%
c. 7.14%
d. 7.68%
Company A has a debt to equity ratio to one. Its cost of equity is 20% and its cost of debt is 10%. Assuming a tax rate of 50%. Company A's weighted average cost of capital is?
(write the process of calculation.)
Chapter 19 Solutions
Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Ch. 19.A - The U.S. government has settled a dispute with...Ch. 19.A - Prob. 2QCh. 19 - Prob. 1PSCh. 19 - Prob. 2PSCh. 19 - WACC True or false? Use of the WACC formula...Ch. 19 - Flow-to-equity valuation What is meant by the...Ch. 19 - APV True or false? The APV method a. Starts with a...Ch. 19 - APV A project costs 1 million and has a base-case...Ch. 19 - Prob. 7PSCh. 19 - APV Consider a project lasting one year only. The...
Ch. 19 - WACC The WACC formula seems to imply that debt is...Ch. 19 - Prob. 10PSCh. 19 - Prob. 11PSCh. 19 - WACC Table 19.4 shows a simplified balance sheet...Ch. 19 - WACC How will Rensselaer Felts WACC and cost of...Ch. 19 - APV Digital Organics (DO) has the opportunity to...Ch. 19 - APV Consider another perpetual project like the...Ch. 19 - Prob. 18PSCh. 19 - Prob. 19PSCh. 19 - Prob. 22PSCh. 19 - Company valuation Chiara Companys management has...Ch. 19 - Prob. 25PSCh. 19 - Prob. 26PS
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