Solution-An expansion of an existing restaurant chain

An expansion of an existing restaurant chain

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Reference no: EM13231851

1. Show how the following events change the discount rate applicable to an expansion of an existing restaurant chain.

a. The covariance between restaurant sales and the market rate of return increases.
b. The riskless rate decreases
c. Several other companies are planning to expand their chains

3. Which of the following companies is likely to have a higher beta, and thus a higher cost of capital?

a. An auto manufacturer who runs an assembly line with union workers.
b. A "high-tech" auto manufacturer with a fully automated line requiring only a handful of nonunion workers.

1. Ampex common stock has a beta of 1.4. If the risk-free rate is 8%, the expected market return 16%, and Ampex has $20 million of 8% debt, with a yield to maturity of 12% and a marginal tax rate of 50%, what is the WACC for Ampex?

Reference no: EM13231851

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An expansion of an existing restaurant chain

Reference no: EM13231851

Reference no: EM13231851

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