Q: ABC Co.'s current ratio is greater than 1. Purchasing raw materials on credit would: A. increase the…
A: A current ratio can be determined by dividing current assets by the current liabilities. Formula,…
Q: a) Learn and Earn Company is financed entirely by common stock that is priced to offer a 20 percent…
A: Learn and Earn Company offers an expected return of 20%. If the company is entirely equity financed,…
Q: n investor knows that she will need £20,000 in ten years and looks at possible savings plans. The…
A: More is the compounding than more is the effective interest rate and more is the future value of the…
Q: the interest tax shield and the probability of distress for different level V of interest tax shield…
A: To find the optimal level of debt for the company, we need to determine the level of debt that…
Q: Question (3) Mary made five annual deposits of $X1 in a savings account that pays interest at a rate…
A: The future value (FV) refers to the value of an investment or asset at a specified point in the…
Q: A company is analyzing two mutually exclusive projects, S and L, with the following cash flows: 0 1…
A: years Project S Project L 0 -$1000 -$1000 1 $877.39 $0 2 $250 $240 3 $10 $420 4 $15…
Q: Describe the following assets and categorise them into real or financial assets giving reasons for…
A: The financial assets a type of acids that are held by traders and investors and these assets help…
Q: The BOD of ABC Co. is dissatisfied with last year's Retur on equity of 15% and wants to increase it…
A: Based on DuPont equation return on equity depends three basic components and to change in return on…
Q: Southern Alliance Company needs to raise $27 million to start a new project and will raise the money…
A: A company can raise capital through different sources. The common sources are common stock,…
Q: Identify which of these statements regarding real estate limited partnerships (RELPs) and real…
A: Both RELPs and REITs give investors the option to purchase real estate without personally owning and…
Q: Calculate the amount of his capital.
A: Using the balance sheet principle, we can determine the capital amount. Total Assets = Total…
Q: Garcia Company is considering a $360,000 investment with the following net cash flows. Garcia…
A: Year Annual Net cashflows pv factors PV of cashflows 1 120000 0.9091 109092 2 80000 0.8264 66112…
Q: 2.11 Heddy is considering working on a project that will cost her $20 000 today. It will pay her $10…
A: Data given: Cash outflow today=$20000 Cash inflow at the end of each of the next 12 months=$10000…
Q: Steinberg Corporation and Dietrich Corporation are identical firms except that Dietrich is more…
A: Market value refers to the value of an asset being prevailing in the market or defines as the…
Q: Assume a company can invest in equipment that will cost $1,000,000 and is expected to generate…
A: Initial cost = $1,000,000 First 3 years cash flow = $160,000 next 3 years cash flow = $140,000 next…
Q: Exercise 10-4A (Algo) Determining the present value of an annuity LO 10-1 The dean of the School of…
A: Net present value refers to the method of capital budgeting used for calculating the difference…
Q: Sunshine Travel has earnings of £18 million of which £6 million is available for either investment…
A: The decision regarding investment is one that can be consider as the most important decision and…
Q: Consider the following two projects: Project A B C. 1.7% d. Year 0 Cash Flow -100 -73 17.3% Year 1…
A: Incremental IRR Increment investment=Investment A-Investment B=100-73=$27 Incremental cash…
Q: Kennedy Limited is an all-equity publicly listed firm with 600,000 shares currently on issue trading…
A: Net Income of the company refers to the Net operating Income available for the shareholders after…
Q: A currency speculator wants to speculate on the future movements of the €. The speculator expects…
A: In future contracts there are daily settlements of margin and amount is required to be made in…
Q: Retirement Funding. Barry has just become eligible for his employer-sponsored retirement plan. Barry…
A: The FV of an investment refers to the collective value of the cash flows of the investment assuming…
Q: SEC monitors trading on the major exchanges to all answers are correct prevent insider…
A: Securities and Exchange Commission (SEC) is an independent regulatory agency of United States…
Q: ssume that an investment is forecasted to produce the following cash flows: a 10% probability of…
A: By making informed investment decisions through capital budgeting, companies can increase their…
Q: 2.11 Heddy is considering working on a project that will cost her $20 000 today. It will pay her $10…
A: The given scenario shows that there is a cash inflow as well as cash outflows. It causes cash flows…
Q: An investor’s portfolio currently is worth K1 million and during the year the investor company at a…
A: The ratio of a portfolio's net gain or loss, defined as the sum of its net income, foreign exchange…
Q: Marshall Company purchases a machine for $1,000,000. The machine has an estimated residual value of…
A: To calculate depreciation using the units-of-production method, we need to determine the…
Q: 5. A corporate bond has a yield of 6.5 percent and a coupon of 4.25 percent. The bond matures in 8…
A: As per our guidelines we are supposed to answer only one question (if there are multiple questions…
Q: Data table Operating Income New York $ Chicago Assets Current 2,150,000 $15,500,000 $ 2,550,000…
A: WACC represents the firm's average cost of raising funds from investors. WACC also represents the…
Q: Suppose you wish to have $17,250 in 5 years. Use the present value formula to find how much you…
A: Compound = semiannually = 2 Future value = fv = $17,250 Time = t = 5 * 2 = 10 Interest rate = r = 5…
Q: You owe $2,000 on a credit card that charges 20% interest. You have $2,200 in your savings account…
A: Debt on Credit card = $2,000 Bank balance on Savings account = $2,200 SB Interest rate = 1.69%…
Q: Consider the following information for Vine Inc.: Beta: 1.39 Risk-free rate: 7% Market Risk Premium:…
A: According to Capital asset pricing model ( CAPM), ke = Rf + [beta × ( Rm - Rf)] Where, ke = cost of…
Q: $ Revenue Cost of sales Gross margins Operating expenses: Research & Development Selling, general &…
A: The ratio is a mathematical relationship between two variables that are used to evaluate the…
Q: I f y o u p u t P 5 0 , 0 0 0 . 0 0 i n a s a v i n g s a c c o u n t t h a t p a…
A: We need to use future value formula to calculate value after 5 year FVn = PV*(1 + r)n FVn = Future…
Q: You need to choose between making a public offering and arranging a private placement. In each case,…
A: When we are calculating Net proceed fr any kind of public or private placement , calculate the…
Q: Assume the annual effective interest rate is i = 2%. An individual wants to invest a capital of…
A: Present value (PV) is a financial concept that represents the current worth of a future sum of money…
Q: the
A: Stock split and Stock dividend are two different type of corporation action usually performed by…
Q: en the following information estimate the price of this corporate bond. Assume that the bond just…
A: Price of bond is the present value of coupon payments plus present value of par value of bond based…
Q: You are currently at time period 0, and you will receive the first payment on an annual payment…
A: Annuity is the series of equal cash payments over the period.
Q: The annual risk free rate is 0.03. We have the followin assets (on an annual basis). Expected return…
A: Portfolio sharp ratio is calculated as shown below. Sharp ratio=Portfolio expected return-Risk free…
Q: A mutual fund with K100 million in assets at the start of the year and with 10 million shares…
A: In a mutual fund, investors pool their money together, and the fund invests in a portfolio of…
Q: Which is not direct measure of a firm's profitability? C. Price-earnings A. Basic EPS B. Profit…
A: The profitability understanding is important part in the decision making because the profit help the…
Q: a y i n g P 3 7 , 5 0 0 . 0 0 p e r m o n t h o n h e r P 2 , 0 0 0 , 0 0 0 . 0 0 , 8…
A: In case of mortgage, a series of periodic equal amount (PMT) is paid. Based on this, total amount to…
Q: a) Compute the present value of an annuity immediate that pays £100 at the end of each month for 5…
A: Annuity refers to a sum of fixed and periodic cash flows. To compute the present value of an annuity…
Q: Cullumber Company issued $1,600,000, 12-year bonds. It agreed to make annual deposits of $82,000 to…
A: A sinking fund is fund in which a particular amount is kept aside that earns compound interest and…
Q: Finance A firm is considering two mutually exclusive projects, X and Y, with the following…
A: MIRR is the modified rate of internal rate of return in which both reinvestment and borrowing rate…
Q: What is the alpha of a portfolio with a beta of 2, an actual return of 22%, market- return of 12%,…
A: The risk free rate, market return and beta of a portfolio is given. And, the required return is…
Q: Please use the following information to answer the next THREE questions. Kaplan Brewery is…
A: After tax salvage value is calculated as shown below. After tax salvage value=Market value-Tax…
Q: IRR, investment life, and cash inflows Oak Enterprises accepts projects earning more than the firm's…
A: IRR is the internal rate of return which will be generated by the performance of the project. At…
Q: Suppose the interest rate is 6.4% APR with monthly compounding. What is the present value of an…
A: Present value of annuity. PV = A * 1-(1+r)-nr where , PV = present value of annuity A =periodic…
Q: Demonstrate how interest rate and currency swaps are constructed and discuss the comparative…
A: Two parties can exchange cash flows based on various interest rates or currencies using financial…
Given the following information of Electric Transport Debt value: $75,000.
Debt information: 8.4 percent coupon bonds outstanding. $1,000 par value, 22 years to maturity, selling for $1,030, the bonds make annual payments
Equity value: $175,000.
Equity information: Beta is 1.21, Market return is 13.1%, and Risk-free rate is 5.1%
Assume the company's tax rate is 40%.
Calculate the WACC for this firm.
11.80%
12.78%
7.48%
9.19%
Step by step
Solved in 3 steps
- You have the following information about a company:Debt: 5,000 3% bonds with twelve years to maturity. The face value of the bond is $1000. The bonds currently sell for $1190 and the bonds make semi-annual paymentsEquity: 125,000 shares outstanding selling for $65 per share. The beta is 1.35. The last dividend paid was $3.25.Market: There is a 5% market risk premium. The risk free rate is 2%. The corporate tax rate is 25%Given the above information, calculate the firm’s WACC.Inventive Response has bonds outstanding that mature in 8.5 years, have a 4 percent coupon, and pay interest annually. These bonds have a face value of $1,000 and a current market price of $1,180.30. What is the company’s after-tax cost of debt if its tax rate is 21 percent? 1.35 percent 1.70 percent 2.15 percent 2.65 percent 3.40 percentYou are given the following information for Tara Ita Power Co. Assume the company’s tax rate is 22 percent. Debt: 5,000 6.6 percent coupon bonds outstanding, $1,000 par value, 20 years to maturity, selling for 109 percent of par; the bonds make semiannual payments. Common stock: 380,000 shares outstanding, selling for $56 per share; the beta is 1.12. Market: 5 percent market risk premium and 4.6 percent risk-free rate. What is the company's WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
- The following is the information on debt issued by Huntington Power Co. Calculate the after-tax cost of debt for the firm. Debt: 4 percent coupon paid semiannually, $1,000 par value, 15 years to maturity, current market price of the bond is $889.0. Tax rate is 20%.The outstanding debt of Berstin Corp. has ten years to maturity, a current yield of 6%, and a price of $80. What is the pretax cost of debt if the tax rate is 30%. Note: The current yield of a bond is its annual coupon divided by its price. A. 4.65% B. 6% OC. 6.2% OD. 7.75%Inventive Response has bonds outstanding that mature in 8.5 years, have a 4 percent coupon, and pay interest annually. These bonds have a face value of $1,000 and a current market price of $1,180.30. What is the company’s after-tax cost of debt if its tax rate is 21 percent? 1.35 percent 1.70 percent 2.15 percent 2.65 percent 3.40 percent Therapeutic Solutions Inc. just paid an annual dividend of $1.45 per share last year. The market price of the stock is $26.30 and the growth rate is 5 percent. What is the firm’s cost of equity? 10.51 percent 10.79 percent 11.06 percent 11.44 percent 11.85 percent
- DIRECTIONS: Read and analyze the following problems and supply what is required and support it with necessary computations. 1. A company plans to issue a 25-year bond with a 12.5% interest rate, issued at a face value of P1, 000. The company is subject a 30% tax rate and expects a return on investment at 8%. Compute for the cost of debt issuance.You are given the following information for Cleen Power Co. Assume the company’s tax rate is 30 percent. Debt: 6,000 7.9 percent coupon bonds outstanding, $1,000 par value, 25 years to maturity, selling for 108 percent of par; the bonds make semiannual payments. Common stock: 510,000 shares outstanding, selling for $69 per share; the beta is 1.12. Market: 10 percent market risk premium and 5.9 percent risk-free rate. What is the company's WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) WACC %Mex Limited issued 12,000 outstanding bonds.The bonds have the following characteristics: Face value = Shs.100 Coupon rate = 9% Current market price = Shs.98. Years to maturity = 11 years Required: What is the approximate after- tax cost of debt if the applicable tax rate is 35%?
- Calculate the cost of capital for a bond that has a $1,000 par value and a contract or coupon interest rate of 11%. Interest payments are $55 and paid semi-annually. The bond has a current market value of $1,000 and will mature in 20 years. The firm's marginal tax rate is 30% a. 11% b. 10.7% c. 7.7% d. 30%bond maturity: 7 years. Coupon: 4.4% paid semi annually. Price: $1020 with par value of $1000. Tax rate : 35%. What is the before and after tax cost of debt? Assume a share of preferred stock with a dividend of $7 per share is selling for a market price of $105. What is the cost of preffered stock(rps)? If a Company has Equity of $246 mil and debt of $327 mil ( no preffered stock), what is the weight of debt?Home Depot has debt outstanding with a face value of $30 billion. The coupon rate on these bonds is 6.2%. The current yield-to-maturity (YTM) on these bonds is 7.8%. Home Depot's tax rate is 26%. What is the effective cost of debt of Home Depot? OA. 9.83% OB. 6.20% OC. 4.59% OD. 5.77% OE. 7.80%
