let Investment NACC let Income After Tax Samsung Group 54,805,555.00 11% 6,550,034.00 Microsoft Apple 66,703,403.00 75.230,920.00 10% 8% 7.350.308.00 6.829.019.00
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- The market values and after-tax costs of various sources of capital used by Ridge Tool are shown in the following table. Source of capital Market value Individual cost Long-term debt $700,000 5.3% Preferred stock 50,000 12.0 Common stock equity 650,000 16.0 a. Calculate the firm’s WACC. b. Explain how the firm can use this cost in the investment decision-making process. Please show your work.Using Miller (1977) personal income tax model to explain the impact of personal taxes due to income from equity investment and income from debt interest payment on the company’s optimal capital structureAs an Analyst you were tasked to compute for the Weighted Average Cost of Capital of variouscompanies given the following information. Income tax rate is 25% a. What is the cost of equity of each companies?b. What is the after tax cost of debt of each companies?c. What is the WACC of each companies? W Corp A Corp Co. Corp Ca Corp Risk Free rate 4.00% 3.00% 2.00% 3.50% Beta 1.25 % 1.50% 1.30% 1.40% Market Return 12.00% 11.00 % 10:00% 8:00% Debt to Equity Ratio 2.5 3 4 3.5 Credit Spread om BPS 200 300 250 150
- Please in calculating return on year end capital employed = profit before tax / capital employed. With the profit before tax what do they add to the profit before tax before they divide it by the capital emYou are looking to purchase Company A. Your projections for the EBITDA of Company A are as follows: EBITDA $21.51 Year 1 $2.0 O $19.77 $21.78 Your cost of capital is 20%. Your investment banker shows you the EBITDA multiples for the following comparable companies: Company x 5.0x Company y 5.50x Company z 6.0x Year 2 $3.0 Given the above information what is the price that you would like to offer to Company A shareholders? Not enough information Year 3 $3.5 None of the above Year 4 $4.0 Year 5 $5.0The user cost of capital: Consider the basic formula for the user cost ofcapital in the presence of a corporate income tax. Suppose the baseline casefeatures an interest rate of 2 percent, a rate of depreciation of 6 percent, aprice of capital that rises at 1 percent per year, and a 0 percent corporate taxrate. Starting from this baseline case, what is the user cost of capital after thefollowing changes?(a) No changes—the baseline case.(b) Te corporate tax rate rises to 35 percent.(c) Te interest rate doubles to 4 percent.(d) Both (b) and (c).
- The cost of equity is _______. A. the interest associated with debt B. the rate of return required by investors to incentivize them to invest in a company C. the weighted average cost of capital D. equal to the amount of asset turnoverIf you had $100,000 available for investing, which of these companies would you choose to invest with? Support your answer with analysis of free cash flow, based on the data provided, and include in your decision whatever other reasoning you chose to utilize.The cost of equity is ________. a.equal to the amount of asset turnover b.the interest associated with debt c.the weighted average cost of capital d.the rate of return required by investors to incentivize them to invest in a company
- According to the M&M propositions WITH and WITHOUT taxes, should a financial manager spend time analysing a firm’s capital structure? What is the optimal capital structure with and without tax? Discuss.You are a personal investor investigating the possibility of investing in Pulleys and Plugs Ltd. Which is a taxation category 2 company. You have a required rate of return of 10% per annum and, as such, need to identify the rate of return demanded by the investors in Pulleys and Plugs to compare to your required rate. You have identified the following characteristics of Pulleys and Plugs. The latest balance sheet for the Pulleys and Plugs shows: Long Term Debt Book Value ($) Bonds: Issued at par: $100 6,000,000 Annual coupon of 14% 8 years to maturity Equity Preference Shares: 1,000,000 100,000 shares outstanding Ordinary Shares: 5,000,000 5,000,000 shares outstanding The company's bank has advised that the interest rate on any new debt finance provided for new projects would be 9% p.a. The company's preference shares currently sell for $13.56 each and pay an annual dividend of $2.20. The company's existing ordinary shares currently sell for $0.87 each and pay a dividend per share of…The return on investments calculation considers only the following components: Sales Average Investment Net income Which of the following formulas best describes the return on investment calculation? 1. (Net Income / Sales) X (Sales / Net Income) 2. (Net Income / Sales) X (Salès / Average Investment) 3. (Average Investment / Sales) X (Net Income / Sales) 4. (Sales / Average Investment) X (Sales / Net Income)