Company effective tax rate and cost of equity

Assignment Help Financial Management
Reference no: EM131297365

A company has a capital structure of 40% debt and 60% equity. The YTM on the company’s bonds is 9%, and the company’s effective tax rate is 40%. The cost of equity is 13%. What is the company’s WACC? Show your work.

Reference no: EM131297365

Questions Cloud

Wishes to maintain a constant debt-equity ratio : A firm wishes to maintain a growth rate of 8 percent and a dividend payout ratio of 52 percent. The ratio of total assets to sales is constant at 1.1, and the profit margin is 9.1 percent. If the firm also wishes to maintain a constant debt-equity ra..
What will be the loan effective annual interest rate : You have contacted a number of car dealerships to determine the best interest rate on a new automobile loan. A Ford dealership has quoted you a 5-year, 10% loan in the amount of $35,000 that will require monthly payments. What is the monthly loan pay..
What is a debenture : What is a debenture? Why do you think that this is the most common form of corporate bond in the United States, but is much less commonly used elsewhere?
Estimating beta of investment is by using the market model : Another approach to estimating the beta of an investment is by using the market model. What is this? Can you find any good websites that provide an analysis? Be sure to give your own insights as well.
Company effective tax rate and cost of equity : A company has a capital structure of 40% debt and 60% equity. The YTM on the company’s bonds is 9%, and the company’s effective tax rate is 40%. The cost of equity is 13%. What is the company’s WACC?
Government and their extensive use of debt to finance growth : “Fannie Mae” (FNMA) and “Freddy Mac” (FHLMC) are Government Sponsored Enterprises (GSEs) and as such were perceived to have low risk.   In the early 2000s. Former Federal Reserve Chairman Alan Greenspan stated that these institutions (“Fannie and Fre..
What is the expected price of the bonds today : Two year ago Lerner Co. issued bonds with a maturity of 15-year, a coupon rate of 8% paid semi-annually, and a par value of $1,000. Today, the market interest rate on these bonds is 6%. What is the expected price of the bonds today?
Bond-what is the modified duration : For the following bond, Par value: 1,000 Coupon rate: 8% paid annually Time to maturity: 3 years Interest rate: 4% What is the modified duration?
Calculate the amount of interest paid over life of mortgage : You plan to purchase an $150,000 house using a 30-year mortgage obtained from your local bank. The mortgage rate offered to you is 5.25 percent. You will make a down payment of 10 percent of the purchase price. Calculate your monthly payments on this..

Reviews

Write a Review

Financial Management Questions & Answers

  Foreign company acquisition

Acquisition by a foreign company and the effects of that decision and the results of foreign exchange in Euro and the exchange rate differences.

  Financial management for profit and non profit organizations

In this essay, we are going to discuss the issues of financial management in a non-profit organisation.

  Method for estimating a venture''s value

Evaluate venture's present value, cash and surplus cash and basic venture capital.

  Replacement analysis

This document show the Replacement Analysis of modling machine. Is replacement give profit to company or not?

  Business finance task - capital budgeting

Your company is considering using the payback period for capital-budgeting. Discuss the advantages and disadvantages of this technique.

  Analysis of the investment

In this project, you will focus on one of these: the additional cost resulting from the purchase of an apple press (a piece of equipment required to manufacture apple juice).

  Conduct a what-if analysis

Review the readings and media for this unit, including the Anthony's Orchard case study media. Familiarise yourself with the Anthony's Orchard company and its current situation.

  Determine operational expenditures

Organisations' behaviour is guided by financial data. In the short term, such data will help determine operational expenditures; in the long term, historical data may help generate forecasts aimed at determining strategic plans. In both instances.

  Personal financial management

How much will you have left over each half year if you adopt the latter course of action?

  Sources of finance for expansion into new foreign markets

A quoted company is considering several long-term sources of finance for expansion into new foreign markets.

  Long term financial planning

This assignment is designed for analyze Long term financial planning begins with the sales forecast and the key input in the long term fincial planning.

  Explain the role of fincial manager

This assignment explain the role of fincial manager, function of manger. And what are the motives of financial manager.

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!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd