Reference no: EM13883403
1. If the cost of new common equity is higher than the cost of internal equity, why would a firm choose to issue new common stock?
2. Calculate all MCC break points for the following information:
Total assets = $1,500,000
Total debt = $600,000
Total equity = $900,000
kd is 10% up to $500,000; 11% after $500,000
ks is 13% up to $100,000; 14% after $100,000
3. Your firm’s ks is 10%, the cost of debt is 6% before taxes, and the tax rate is 40%. Given the following balance sheet, calculate the firm’s after tax WACC:
Total assets = $25,000
Total debt = $15,000
Total equity = $10,000
4. Explain the difference between WACC and MCC.
5. What determines whether to use the dividend growth model approach or the CAPM approach to calculate the cost of equity?
|
What is your point of view on bt corn
: Write an essay on this topic of 500-750 words (2-3 pages, double spaced APA format). Present the concepts in your own words, and include current information.
|
|
Dividends are expected to remain at this level indefinitely
: Harry Trading Company must choose its optimal capital structure. Currently, the firm has a 20 percent debt ratio and the firm expects to generate a dividend next year of $5.44 per share. Dividends are expected to remain at this level indefinitely.
|
|
How would you proceed in a massive organization
: Write an overview of the promise you see for this system, the frustrations, or problems you may face? Propose other solutions and give reasoning for your choice. How would you proceed in a massive organization
|
|
What is the market value of assets of the firm
: The book value of equity of a firm is $100 million and the market value of equity is $200 million. The face value of debt of the firm is $50 million and the market value of debt is $60 million. What is the market value of assets of the firm?
|
|
CAPM approach to calculate the cost of equity
: If the cost of new common equity is higher than the cost of internal equity, why would a firm choose to issue new common stock? Calculate all MCC break points for the following information: What determines whether to use the dividend growth model app..
|
|
What do we mean by being a core competence
: The various functions within the company are where the value is created but do they represent a core competence? So what do we mean by being a core competence
|
|
Equity cost of capital for the company that released shares
: A stock is expected to pay $0.80 per share every year indefinitely. If the current price of the stock is $18.90, and the equity cost of capital for the company that released the shares is 6.4%, what price would an investor be expected to pay per shar..
|
|
Price of the land has been increasing
: Some time ago, Vanessa purchased eleven acres of land costing $58,500. Today, that land is valued at $253,167. How long has she owned this land if the price of the land has been increasing at 9% per year? On your ninth birthday, you received $500 whi..
|
|
Assignment on cash distribution plan
: The partnership of Pen, Evan, and Torves has asked you to assist in winding up its business affairs. You compile the following information:
|