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Acetate, Inc., has equity with a market value of $24 million and debt with a market value of $9.6 million. The cost of debt is 10 percent per year. Treasury bills that mature in one year yield 6 percent per year, and the expected return on the market portfolio is 11 percent. The beta of Acetate’s equity is 1.25. The firm pays no taxes. a. What is Acetate’s debt-equity ratio? (Do not round intermediate calculations and round your final answer to 2 decimal places (e.g., 32.16).) Debt–equity ratio b. What is the firm’s weighted average cost of capital? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).) Weighted average cost of capital % c. What is the cost of capital for an otherwise identical all-equity firm? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).) Cost of capital %
XYZ has a current stock price of $46 and its last dividend was $2.40. what is XYZ’s expected stock price 5 years from now?
A company currently pays a dividend of $3.75 per share (D0 = $3.75). It is estimated that the company's dividend will grow at a rate of 17% per year for the next 2 years, and then at a constant rate of 7% thereafter. The company's stock has a beta of..
Assume a simple banking world in which no banks hold excess reserves, and the public holds no currency. If a bank sells a $100 security to the Fed, explain the accounting process for the first two steps in the deposit expansion process, assuming a 10..
Describe some factors that are generally beyond the firm’s control but still affect its cost of capital?
Jane plans to borrow from a bank to finance her investment in a real estate project. She considers an ARM loan with three-year loan term, $100,000 loan amount. If the loan will be repaid after 3 years, what would be the monthly payment and the ending..
A stock is trading at $90 per share. The stock is expected to have a year-end dividend of $2 per share (D1 = $2), and it is expected to grow at some constant rate g throughout time. The stock's required rate of return is 16% (assume the market is in ..
What has occurred with company’s dividend payout, dividend yield, and dividend per share over the past three years? Do you have any explanations for what has occurred? How does your selected company’s dividend payout, dividend yield, and dividend per..
Given the following information: interest rate 8% tax rate 30% dividend $1 price of the common stock $50 growth rate of dividends 7% debt ratio 40% a. Determine the firm's cost of capital. b. If the debt ratio rises to 50 percent and the cost of fund..
Expected Portfolio Returns. If a portfolio has a positive investment in every asset, can the expected return on the portfolio be greater than that on every asset in the portfolio? Can it be less than that on every asset in the portfolio?
When considering total liabilities for all banks in the U.S., which of the following correctly lists (from large to small),
The company is considering adding a new product in a different line of business that is unrelated to their current product.
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