User Account

All Pages

Comment on the value of beta

Assignment Help Finance Basics
Reference no: EM131958127

Question: A company is estimating its Weighted Average Cost of capital (WACC). The company has collected the following information:

The capitaI structure consists of 50 percent debt and 50 percent common equity.

The company has JD10 million bank loan at 8 percent.

The company has 10-year bonds outstanding with a 6 percent annual coupon that are trading at par.

The company's tax rate is 50 percent.

The risk·free rate is 4 percent.

The market risk premium is 6 percent.

The stock's beta is 1.8

A .What is the company's WACC? Under what conditions, the company can use this cost?

B. Comment on the value of beta? Also, what can be done, by the financial officer, to reduce it?

C. If the inflation rate increases what Impact would this have on the cost of equity and why?

Reference no: EM131958127

Questions Cloud

What is the cost of common stock for the company : A company currently pays $5 dividend on its common stock. These dividends are expected to grow by 4% each year, perpetually.
Manage for a newly emerging company : Your textbook describes FOUR different assets that traditionally make up the company's IT portfolio.
Calculate realized rate of return earned on bond : Calculate the realized rate of return earned on this bond.
Show how to realize a certain euro-denominated profit : The spot exchange rate is $1.25 = €1.00 and the one-year forward exchange rate is $1.20 = €1.00.
Comment on the value of beta : A company is estimating its Weighted Average Cost of capital (WACC). The company has collected the following information.
What is the level of? brenmar inventories : Brenmar's inventory turnover ratio is 8.6 times. What is the level of? Brenmar's inventories?
Describe signs and symptoms of disease : Describe signs and symptoms of disease. Describe treatment options. prognosis of disease? Explain how the patient's life will change with this diagnosis.
What price change would lead to a margin call : A company enters into a short futures contract to sell 5,000 bushels of wheat for 250 cents per bushel. The initial margin as stipulated by the exchange.
Calculate the present value of annuity streams : Calculate the present value of the following annuity streams: a. $6,000 received each year for 6 years on the last day of each year

Reviews

Write a Review

Finance Basics Questions & Answers

  Calculate the integral of given function using monte-carlo

Use Monte Carlo to calculate the integral of the function Exp( x ) for 0 .

  Which stock has greater market risk

If rf were constant at 6.8% and the regression had been run using total rather than excess returns, what would have been the regression intercept for stock A?

  Discuss the benefits and disadvantages of the policy

Research, individually, a corporate social responsibility (CSR) policy at a large organization. Prepare to discuss the benefits and disadvantages of the policy with your team.

  Characteristics of operational risk data

1. Discuss the characteristics of operational risk data and explain how this influences how operational risk is measured?

  Explain computing net present value for two mutually

Explain Computing net present value for two mutually exclusive projects and the company has exactly this amount to invest

  What is the t-ratio for exp

What is the t-ratio for EXP? Does it indidcate that experience is a statistically significant determinant of salary if a 95 percent confidence level is desired?

  The firm''s required return

ABC Company's last dividend was $1.3.  The dividend growth rate is expected to be constant at 7% for 3 years, after which dividends are expected to grow at a rate of 4% forever.  The firm's required return (rs) is 15%.  What is its current stock pric..

  Different implications of running a company

There are different implications of running a company that is within or outside of the European Union. If you were the head of a firm based in the United States, please answer the following questions, providing the rationale behind your answers:

  Calculate the net working capital

You have just been hired by Dell Computers in their capital budgeting division. Your first assignment is to determine the net cash flows and NPV of a proposed.

  Explain how investing to provide the wacc returns keeps

Calculate the after-tax WACC for a firm with a 25 percent tax rate, a 10 percent cost of debt, a 30 percent cost of equity, and a target debt to value of 0.30. Explain how investing to provide the WACC returns keeps the debt and equity investors happ..

  Purchased bright light industries common stock

George Wilson purchased Bright Light Industries common stock for $47.50 on January 31, 2010. The firm paid dividends of $1.10 during the last 12 months. George sold the stock today (January 30, 2011) for $54.00. What is George's holding period re..

  The process needs new machinery that would cost 1872783

briarcrest condiments is a spice-making firm. recently it developed a new process for producing spices. the process

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