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You are tasked with estimating the cost of capital for the Coca-Cola Company. Coca-Cola’s regression beta is 1.01 and their D/E ratio is 0.3. Assume a corporate tax rate of 35%, an equity market risk premium of 6%, and a risk free rate of 3%. Coca-Cola’s cost of debt is 4.78%.
What is Coca-Cola’s WACC?
Suppose Coca-Cola plans to increase their D/E ratio to 0.4. Calculate what impact this will have on Coca-Cola’s WACC.
Suppose that a friend has started a business selling software. if you require a rate of return of 14% to make this investment, should you buy the stock?
You’ve just joined the investment banking firm of Dewey, Cheatum, and Howe. What is the present value of the second option?
Titan Mining Corporation has 14 million shares of common stock outstanding, 900,000 shares of 9 percent preferred stock outstanding and 220,000 ten percent semiannual bonds outstanding, par value $1,000 each. What discount rate should the firm apply ..
Jake and Hannah have been married for 45 years at the time of Jake’s death. They have two surviving adult children, Susie and Tony. All the following transfers from Jake’s estate to Hannah are non deductible terminable interests for federal estate ta..
Hickock Mining is evaluating when to open a gold mine. The mine has 34,000 ounces of gold left that can be mined, and mining operations will produce 6,800 ounces per year. The required return on the gold mine is 10 percent, and it will cost $34.8 mil..
Assume the inflation rate in Canada to be 5 percent per year for the indefinite future.
how much less will you have in your account after 19 years than if you increased your contributions?
Cash flow timing for accounts receivable. Zenotech Incorporated sells business software to a variety of companies. The payment for products and services varies across the Zenotech customers. Assume that Zenotech records all sales on the last day of t..
What is the standard deviation of the demand during lead time?
Given that a firm's return on equity is 22 percent and management plans to retain 37 percent of earnings for investment purposes, what will be the firm's growth rate? If the firm decides to increase its retention rate, what will happen to the value o..
Reclamation costs on a project are expected to be incurred over a 30 year period from 27 to 56 years in the future from now. Reclamation costs are estimated to escalate 5.0% per year in the future
Discuss the basic meanings and concepts and fundamentals of risk, return, and risk preference.
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