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a. Why a company's actions to increase its operating leverage results in increasing the company's equity Beta? Explain.
b. Company P's capital structure contains 10% debt and 90% equity. Company Q's capital structure contains 50% debt and 50% equity. Both companies pay 8% annual interest on their debt. Shares of Company P has a Beta of 1.1 and the shares of Company Q have a Beta of 1.45. The risk-free rate of interest equals 5%, and the expected return on the market portfolio equals 12%.
Required:
Refer to the information in (b) above and answer the following questions:
i. Calculate the Weighted Average Cost of Capital (WACC) for both companies assuming there is no taxes.
ii. Recalculate the WACC for both companies assuming there is a tax rate of 30%
iii. Which company is benefited more for the tax effect on its WACC? Why?
Juan Garza invested $35,000 10 years ago at 12 percent, compounded quarterly. How much has he accumulated?
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Davis' CFO estimates that the company's WACC os 10%. What is Davis' cost of common equity?
You have approached your local bank for a start-up loan commitment for $1,200,000 needed to open an auto repair store.
What are the interest rates charged by the bank on the first-period loans for the type G and type B borrowers, respectively
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Suppose 90% of kids who visit a doctor have a fever, and 35% have a sore throat. Whats the probability that a kid goes to the doctor with a fever and a sore throat?
15 for original work in apa format please 3-4 references no internet copy workyou have been hired as an executive
Based on this case and the two previous Graeter's cases, what are the company's most important strengths? Can you identify any weaknesses that might affect its ability to grow?
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