User Account

All Pages

Calculate the company cost of equity

Assignment Help Finance Basics
Reference no: EM132953414

A U.S. company borrows U.S. funds at an interest rate of 9 percent per year. Its beta is 1.0. The long-term annualized risk-free rate in the U.S. is 4 percent. The stock market return in the U.S. is expected to be 12 percent annually. The company's target capital structure is 30 percent debt and 70 percent equity. The firm is subject to a 26% corporate tax rate (federal and state combined).

(1) Compute the company's after-tax cost of debt.

(2) Calculate the company's cost of equity.

(3) Compute the company's weighted average cost of capital.

Reference no: EM132953414

Questions Cloud

What are some typical negative loan covenants : 1. What are five key ratios that lenders consider? How do they differ? What is the most conservative ratio for a lender to apply?
What the amount of cash inflow from customers : The balance in Accounts Receivable, What the amount of cash inflow from customers that would appear in the operating section of the statement of cash flows is?
Compute the cost of dollar-denominated equity : The U.S. risk-free rate is currently 2 percent. The expected U.S. market return is 10 percent. ABC, Inc. is considering a project that has a beta of 1.4.
What the amount of uncollectible accounts expense recognized : What the amount of uncollectible accounts expense recognized on the 2011 income statement is? On January 1, 2011 Grace Company had an $14,000 balance
Calculate the company cost of equity : A U.S. company borrows U.S. funds at an interest rate of 9 percent per year. Its beta is 1.0. The long-term annualized risk-free rate in the U.S. is 4 percent.
Compute the country risk factor : Pierre Imports, a U.S. company, would like to assess the country risk of Bennfi. Pierre has identified the political and financial risk factors shown below.
Concepts and topical issues of international finance : Demonstrate a comprehensive knowledge and critical appreciation of the key concepts and topical issues of International Finance
What expenses for the period must have been : Retained Earnings at the beginning and ending, If revenues were $4,300 and dividends paid to stockholders were $1,000, expenses for the period must have been
Which of the liabilities is often referred to as free debt : Which of the following liabilities is often referred to as "free debt" because it rarely carries any interest if paid within a specified period of time?

Reviews

Write a Review

Finance Basics Questions & Answers

  Create a positive or negative externality

Late-night road construction begins on a new bridge. As a consequence, traffic is rerouted past your house while the construction takes place.

  Differentiate between net income eps ebitda net cash flow

differentiate between net income eps ebitda net cash flow nopat free cash flow mva and eva. what is the primary

  Determine how much money will be in the account

For the next 9 years, you decide to place $568 in equal year-end deposits into a savings account earning 4.52 percent per year.

  Implied ppp rate of exchange of turkish lira?

Assume the implied PPP rate of exchange of Turkish Lira? (TRY) per U.S. dollar is 4.50 according to the Big Mac Index.? Further, assume the current exchange

  Explain how would distribute media budget

Explain how you would distribute your media Budget. Create a pie chart showing allocated percentages per media (based on your Media Mix).

  What is present value of the salary if the discount rate 6%

Tom Adams has received a job offer from a large investment bank as a clerk to an associate banker. His base salary will be 60,000. He will receive his first annual salary payment one year from the day he begins to work. His salary will grow at 2% ..

  Bruceton hotels is an all-equity firm with 60000 shares of

bruceton hotels is an all-equity firm with 60000 shares of stock outstanding. the stock has a beta of 1.27 and a

  Create the best solution for solving the problem

Create the best solution for solving the problem of who owns the slower horse. Justify your response. Explain the main reasons why you believe your solution would solve the two men's problem of who owns the slower horse. Provide a rationale for you..

  What is the? company debt ratio-dearborn supplies

Dearborn Supplies has total sales of $197 ?million, assets of $96 ?million, a return on equity of 30 percent, and a net profit margin of 7.4 percent.

  There is a 1 delinquency rate for consumers with credit

there is a 1 delinquency rate for consumers with credit rating scores above 800. if umuc credit union provides large

  Explain why someone would want to deal in options

Describe call and put options and explain why someone would want to deal in options rather than in the underlying asset.

  What will be your cash flow at the end of the year

Suppose that you buy a TIPS (inflation-indexed) bond with a 1-year maturity and a coupon of 6% paid annually.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd